江西财经大学高级财务会计国际学院题库chapter.docVIP

Advanced Accounting, 11e (Beams/Anthony/Bettinghaus/Smith) Chapter 14 Foreign Currency Financial Statements Multiple Choice Questions 1) A U.S. firm has a Belgian subsidiary that uses the British pound as its functional currency. According to GAAP, the U.S. dollar from Belgian units point of view will be A) its only foreign currency. B) its local currency. C) its current rate method currency. D) its reporting currency. Answer: D Objective: LO1 Difficulty: Easy 2) Selvey Inc. is a wholly-owned subsidiary of Parsfield Incorporated, a U.S. firm. The country where Selvey operates is determined to have a highly inflationary economy according to GAAP definitions. Therefore, for purposes of preparing consolidated financial statements, the functional currency is A) its reporting currency. B) its current rate method currency. C) the US dollar. D) its local currency. Answer: C Explanation: C) Selvey must use the functional currency of the reporting entity. Objective: LO3 Difficulty: Easy 3) All of the following factors would be used to define a foreign entitys functional currency, except A) high volume of intercompany transactions. B) expenses for foreign entity primarily driven by local factors. C) financing for foreign entity denominated in local currency. D) foreign entitys status as a local tax haven for transfer pricing purposes. Answer: D Objective: LO1 Difficulty: Easy 4) The primary goal behind consolidating financial statements of a controlled subsidiary is A) assuring that the subsidiary financial statements are the same under the temporal method or the current rate method. B) assuring that the individual nature of the subsidiary entity is not lost in the consolidation. C) representing the conversion of statements at the historical exchange rate. D) representing the companys underlying economic condition. Answer: D Objective: LO2 Difficulty: Easy 5) Pelmer has a foreign subsidiary, Sapp Corporation of Germany, whose functional currency is t