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Flashcards in MISCE Deck (22):
1

A purchas of goods, denominated in a currency other than the entity's functional currency, resulted in a payable that was fixed in terms of the amount of foreign currency that would be paid.  Exchange rates between the functional currency and the currency in which the transaction was denominated changed.  The resulting loss should be included as a

Component of income from continuing operation

2

Under IFRS reporting, how is presentation currency defined?

The currency in which financial statements are presented.

3

A sale of goods, denominated in a currency other than the entity's functional currency, resulted in a receivable that was fixed in terms of the amount of foreign currency that would be received.  Exchange rates between the functional currency and the currency in which the transaction was denominated changed.  The resulting gain should be included as a 

Transaction gain reported as a component of income from continuing operations.

4

Which of the following is not an IFRS requirement regarding foreign currency translation?

a. If the functional currency is the same as the presentation currency, gains or losses are reported in profit and loss for the period.

b. Monetary items are translated at the year-end spot rate.

c. If the functional currency is not the same as the presentation currency, gains or losses are deferred to future periods.

d. Nonmonetary items measured at historical cost are translated at the historical exchange rate.

If the functional currency is not the same as the presentation currency, gains or losses are deferred to future periods.

5

The balance in Bart Corp's foreign exchange loss account was $13,000 at December 31, year 1, before any necessary year-end adjustment relating to the following:

Bart had a $20,000 loss resulting from the translation of the accounts of its wholly owned foreign subsidiary for the year ended December 3, year 1.

Bart had an account payable due to an unrelated foreign supplier payable in the local currency of the foreign supplier on January 27, year 2.  This US dollar equivalent of the paybale was $100,000 on the November 28, year 1 invoice date, and it was $106,000 on December 31, year 1.

In Bart's year 1 consolidated income statement, what amount should be included as foreign exchange loss?

$19,000

6

Gains from remeasuring a foreign subsidiary's financial statements from the local currency, which is not the functional currency, into the parent company's currency should be reported as a

Part of continuing operations.

7

The functional currency of Lore, Inc's subsidiary is the euro.  Lore borrowed euros as a partial hedge of its investment in the subsidiary.  In preparing consolidated financial statements, Lore's translation loss on its investment in the subsidiary exceeded its exchange gain on the borrowing.  How should the effects of the loss and gain be reported in Lore's consolidated financial statements?

The translation loss less the exchange gain is reported as other comprehensive income.

8

GordonLtd., a 100% owned British subsidiary of a US parent company, reports its financial statements in local currency, the British pound.  A local newspaper published the following US exchange rates to the British pound at year-end:

Current Rate          $1.50

Historical rate           1.70

Average rate            1.55

Inventory (FIFO)        1.60

Which currency ration should gordon use to convert its income statement to US dollars at year end?

$1.55

9

Fogg Co., a US company, contracted to purchase foreign goods.  Payment in foreign currency was due 1 month after the goods were received at Fogg's warehouse.  Between the receipt of goods and the time of payment, the exchange rates changed in Fogg's favor.  The resulting gain should be included in Fogg's financial statements as a

Component of income from continuing operations.

10

Certain balance sheet accounts of a foreign subsidiary of Post, Inc, at December 31, year 1, have been translated into US dollars as follows:

                                        Current rates           Historical rates

Accounts receivable        $120,000                 $100,000

Prepaid insurance               55,000                     50,000

Copyright                            75,000                      85,000

                                         250,000                    235,000

The subsidiary's functional currency is the currency of the country in which it is located.  What total amount should be included in Post's December 31, year 1 consolidated balance sheet for the above accounts?

$250,00

11

On January 1, year 1, Kiner Company formed a foreign branch.  The branch purchased merchandise at a cost of 720,000 local currency units on February 15, year 1.  The purchase price was equivalent to $180,000 on this date.  The branch's inventory at December 31, year 1, consisted solely of merchandise purchased on February 15, year 1. The exchange rate was 6 LCU to $1 on December 31, year 1, and the average rate of exchange was 5 LCU to $1 for year 1. Assume that the LCU is the functional currency of the branch.  In Kiner's December 31, year 1 balance sheet, the branch inventory balance of 240,000 LCU should be translated to US dollars at

$40,000

12

Post, Inc had a credit translation adjustment of $30,000 for the yaer ended December 31, year 1.  The functional currency of Post's subsidiary is the currency of the country in which it is located.  Additionally, Post had a receivable from a foreign customer payable in the local currency of the customer.  On December 31, year 1, this receivable for 200,000 LCU was correctly included in Post's balance sheet at $110,000.  when the receivable was collected on February 15, year 2, the US dollar equivalent was $120,000.  In Post's year 2 consolidated income statement, how much should be reported as foreign exchange transaction gain?

$10,000

13

Which of the following rates may be used to translate the cash flow statement:

I Historical exchange rates.

II Current exchange rates.

III Weighted-average rates

I and III

14

For IFRS reporting, the functional currency is

The currency in which the company primarily operates.

15

If one Canadian dollar can be exchanged for 90 cents of US money, what fraction should be used to compute the indirect quotation of the exchange rate expressed in Canadian dollars/

1/.90

16

The functional currency of Nash, Inc.'s subsidiary is the Swiss franc.  Nash borrowed Swiss francs a a partial hedge of its investment in the subsidiary.  In preparing consolidated financial statements, Nash's translation loss on its investment in the subsidiary exceeded its exchange gain on the borrowing.  How should the effects of the loss and gain be reported in Nash's consolidated financial statements?

The translation loss less the exchange gain is reported as "other comprehensive income" under one of three alternatives and "accumulated other comprehensive income" in the stockholders' equity section of the balance sheet.

17

The France Co owns a foreign subsidiary with 2,400,000 LCU of property, plant, and equipment before accumulated depreciation at December 31, year 3.  Of this amount, 1,500,000 LCU were acquired in year 1 when the rate of exchange was 1.5 LCU to $1, and 900,000 LCU were acquired in year 2 when the rate of exchange was 1.6 LCU to $1.  The rate of exchange in effect at December 31, year 3, was 1.9 LCU to $1.  The weighted average of exchange rates which were in effect during year 3 was 1.8 LCU to $1.  Assuming that the property, plant, and equipment are depreicated using the straight-line method over a 10-year period with no salvage value, how much depreciation expense relating to the foreign subsidiary's property, plant, and equipment should be charged in France's income statement for year 3?  Assume the US dollar is the functional currency.

$156,250

18

Certain balance sheet accounts in a foreign subsidiary of the Brogan Co at Dec 31, year 1, have been remeasured into US dollars as follows:

                                                      Current              Historical

Equity securities carried at cost     $100,000            $110,000

Marketable equity securities

carried at current market price        120,000               125,000

Inventories carried at cost               130,000                132,000

Inventories carried at NRV                80,000                 84,000

                                                       430,000                451,000

What amount should be shown in Brogan's balance sheet at December 31, year 1, as a reslut of the above information?

$442,000

19

A foreign subsidiary's functional currency is its local currency, which has not experienced significant inflation.  The weighted-average exchange rate for the current year would be the appropriate exchange rate for translating

a. Salaries expense and Sales to external customers

b. Salaries expense

c. Sales to external customers

d. Neither

Salaries expense and Sales to external customers.

20

For IFRS reporting purposes, currencies are defined as

Foreign, functional, and presentation

21

A subsidiary's functional currency is the local currency, which has not experienced significant inflation.  The appropriate exchange rate for translating the depreciation on plan assets in the income statement of the foreign subsidiary is the 

Weighted-average exchange rate for the current year.

22

A foreign subsidiary's functional currency is its local currency, which has not experienced significant inflation.  The weighted-average exchange rate for the current year would be the appropriate exchange rate for translating

a. Wages expense

b. Wages expense and Sales to customers

c. Sales to customers

d. Neither

Wages expense and Sales to customers