1. All of the following are benefits the U.S. will gain from the adoption of globally consistent...
Question:
1. All of the following are benefits the U.S. will gain from the adoption of globally consistent accounting standards except for:
a. Reduction in reporting costs as the need for multiple sets of financial statements decreases.
b. Increased quality of information available to investors.
c. Continued expansion of capital markets across national borders, facilitating more efficient use of global capital.
d. Nearly seamless transition with minimal expenses related to corporate governance considerations.
The balance in Newsprint Corp.'s foreign exchange loss account was $10,000 on December 31, 20X8, before any necessary year-end adjustment relating to the following:
(1) Newsprint had a $15,000 debit resulting from the restatement in dollars of the accounts of its wholly owned foreign subsidiary for the year ended December 31, 20X8.
(2) Newsprint had an account payable to an unrelated foreign supplier, payable in the supplier's local currency unit (LCU) on January 15, 20X9. The U.S. dollar-equivalent of the payable was $50,000 on the December 1, 20X8, invoice date and $53,000 on December 31, 20X8.
2. Based on the information provided, in Newsprint's 20X8 consolidated income statement, what amount should be included as foreign exchange loss in computing net income, if the LCU is the functional currency and the translation method is appropriate?
a. $28,000
b. $13,000
c. $25,000
d. $8,000
3. Based on the information provided, in Newsprint's 20X8 consolidated income statement, what amount should be included as foreign exchange loss in computing net income, if the U.S. dollar is the functional currency and the remeasurement method is appropriate?
a. $15,000
b. $10,000
c. $25,000
d. $28,000
4. When the local currency of the foreign subsidiary is the functional currency, a foreign subsidiary's inventory carried at cost would be converted to U.S. dollars by:
a, translation using historical exchange rates.
b. remeasurement using historical exchange rates.
c. remeasurement using the current exchange rate.
d. translation using the current exchange rate.
5. All of the following stockholders' equity accounts of a foreign subsidiary are translated at historical exchange rates except:
a. retained earnings.
b. common stock.
c. additional paid-in capital.
d. preferred stock.
6. Dividends of a foreign subsidiary are translated at:
a. the average exchange rate for the year.
b. the exchange rate on the date of declaration.
c. the current exchange rate on the date of preparation of the financial statement.
d. the exchange rate on the record date.
On September 30, 20X8, Wilfred Company sold inventory to Jackson Corporation, its Canadian subsidiary. The goods cost Wilfred $30,000 and were sold to Jackson for $40,000, payable in Canadian dollars. The goods are still on hand at the end of the year on December 31. The Canadian dollar (C$) is the functional currency of the Canadian subsidiary. The exchange rates follow:
| September 30 | 1C$ = $0.80 |
| December 31 | 1C$ = $0.90 |
7. Based on the preceding information, at what dollar amount is the ending inventory shown in the trial balance of the consolidated worksheet?
a. $45,000
b. $50,000
c. $40,000
d. $35,000
8. Based on the preceding information, what amount of unrealized intercompany gross profit is eliminated in preparing the consolidated financial statements for the year?
a $0
b. $5,000
c. $10,000
d. $15,000
9. Based on the preceding information, at what amount is the inventory shown on the consolidated balance sheet for the year?
a. $45,000
b. $30,000
c. $40,000
d. $35,000
10. Nichols Company owns 90% of the capital stock of a foreign subsidiary located in Ireland. As a result of translating the subsidiary's accounts, a debit of $160,000 was needed in the translation adjustments account so that the foreign subsidiary's debits and credits were equal in U.S. dollars. How should Nichols report its translation adjustments on its consolidated financial statements?
a. As a $144,000 increase in the stockholders' equity section of the balance sheet.
b. As a $144,000 reduction in consolidated comprehensive net income.
c. As a $160,000 debit in stockholders' equity section of the balance sheet.
d. As a $160,000 reduction in consolidated comprehensive net income.
Expert Answer:
Answer 1 Correct Answer is D Nearly seamless transition with minimal expenses related to corporate g... View the full answer
