#8 Flashcards
(20 cards)
Nominal dollar
Unadjusted for changes in purchasing power
Constant dollar
Dollar restated based on calculations of CPI ratios
Current cost
Replacement cost
Historic cost
cost at the time when asset was acquired or liability assumed
Is accumulated depreciation of equipment nonmonetary?
YES. Depreciation related to PP&E are nonmonetary
How to measure murrent cost amount of inventory and PPE
measured at current cost or lower recoverable amount at the measurement date
Gains and losses from foreign exchange transactions that are an “extension” of the parent’s domestic operation
Component of income from continuing operation
Gains or loss from remeasuring the foreign subsidiary’s financial statement from local currency to the functional currency, where does it go?
Income from continuing operations of the parent company. Basically it goes into net income
Gains or loss from translation adjustments, where does it go?
As component of accumulated other comprehensive income in consolidated equity until disposed of
Rate to be used to translate all assets and all liabilities from the functional currency to the reporting currency
Current rate
Under translation (current rate) method, what is the exchange rate that is used to translate all income statement items such as salaries expense and sales to external customers.
weighted average exchange rate
What happens when a foreign currency transaction is not settled at year-end
a transaction gain or loss must be reported on the year-end income statement. So the transaction completed next year will be compared against the transaction gain or loss on the year-end income statement.
What exchange rate is used when a company is converting foreign currency that is the local currency to reporting currency?
Average exchange rate
When the translation method is used, how does common stock and additional paid-in capital differ from assets and liabilities?
Assets and liabilities are translated using the current rate
Common stocks and additional paid-in capital are translated using historical exchange rate
Difference between foreign transaction gain(loss) and foreign translation gain(loss)?
Foreign transaction gain(loss) is recorded in income from continuing operation.
Foreign translation gain(loss) is recorded in other comprehensive income .
How should a transaction denominated in a foreign currency be recorded on the date of the transaction?
At the spot rate on the date of the transaction.
On personal financial statements, how are assets and liabilities valued?
At fair market value
Net assets are presented at what value?
At fair market value. So an individual’s business interest should be reported at the estimated current value.
Bonus to officers in year 1 were paid in year 2, how do you account for the bonus
Add the bonus to compensation expense in year 1, because it’s bonus FOR year 1. Service already rendered, doesn’t matter if it’s not paid out until year 2.
Gains or loss on fixed assets (include involuntary conversions) are always recognized during the period based on what?
record amount (BV) plus any costs associated with the transaction.
