Question 1

If a U.S.Company purchases inventory on account for $32,000 euros from a British Company when the exchange rate is $1 to $1.28 euros, how would the British Company recognize the sales revenue and the accounts receivable?

Accepted Answer

A

Question 2

Explain the factors which have led to the differences in accounting standards among nations.

Accepted Answer

1. Social and cultural values
2. Political and legal systems
3. Business activities and economic conditions
4. Standard-setting processes
5. Forms of ownership and capital markets
6. Cooperative efforts between nations

Question 3

Describe the complexities stemming from U.S.-based companies operating in an international environment.

Accepted Answer

1. Risk associated with settling accounts in currency other than U. S. dollars.
2. Translation to financial statements prepared in a foreign currency.
3. Differences in national accounting standards.
4. Social, language, legal, taxation and cultural differences.

Question 4

A U.S.company purchases medical lab equipment from a Japanese company.The Japanese company requires payment in Japanese yen.In this transaction, the yen would be referred to as the ___________ currency.

Accepted Answer

The Japanese yen would be referred to as the denominated currency, as it is the currency in which the payment is required to be made to the Japanese company.

Question 5

The process of expressing a subsidiary's financial statement amounts denominated in a foreign currency into amounts measured in the reporting currency of its parent company is referred to as:

Accepted Answer

Foreign currency translation is the process of converting subsidiaries' financial statements denominated in foreign currency into the parent company's reporting currency. Redenomination of financial statements, currency consolidation, and foreign currency transaction may be related to foreign currency translation, but they are not the same process.

Question 6

A U.S.company purchases medical lab equipment from a Japanese company.The Japanese company requires payment in Japanese yen.In this transaction, the dollar would be referred to as the ___________ currency.

Accepted Answer

The answer of A U.S.company purchases medical lab equipment from...

Question 7

One of the challenges facing U.S.companies adopting IFRS is:

Accepted Answer

The challenges facing US companies adopting IFRS include the costs incurred to do so, the subjectivity introduced into financial reporting, and certain areas where convergence may not be achieved. Therefore, all of the above options are correct.

Question 8

Translation of a foreign entity's financial statements into the reporting currency of a domestic entity is typically done

Accepted Answer

Foreign entity's financial statements are typically translated into the reporting currency of a domestic entity to enable a parent company to include its foreign subsidiary's financial statements in its consolidation. This is done to present consolidated financial statements that reflect the financial position, performance, and cash flows of the parent company and its subsidiaries as if they were a single economic entity.

Question 9

Explain the goal of harmonization of accounting standards.Why is this so important to multinational companies?

Accepted Answer

The answer of Explain the goal of harmonization of accounting...

Question 10

If a U.S.Company purchases inventory on account for $32,000 euros from a British Company when the exchange rate is $1 to $1.28 euros, how would the U.S.Company recognize the inventory and the accounts payable?

Accepted Answer

The U.S. company would recognize the inventory at the dollar equivalent of the euros at the time of the transaction. $32,000 euros / 1.28 = $25,000. Therefore, both inventory and accounts payable would be recognized at $25,000.

Question 11

Which of the following is true regarding the Securities and Exchange Commission requirements from foreign companies seeking to sell securities on U.S.stock markets?

Accepted Answer

The Securities and Exchange Commission (SEC) allows foreign companies seeking to sell securities on U.S. stock markets to file financial statements prepared in accordance with IFRS without reconciliations to U.S. GAAP. This exemption was enacted in 2007 to reduce the costs and regulatory burdens on foreign issuers, while still ensuring adequate investor protection. However, if the foreign company chooses to reconcile their financial statements to U.S. GAAP, they may do so voluntarily.

Question 12

RWB Corporation, a U.S.based company, bought inventory from a German company on June 5 for 12,000 euros, when $1 was equal to 1.20 euros.The company settled its payable with 12,000 euros on August 4 when $1 was equal to 1.25 euros.RWB's measurement currency is the U.S.dollar.RWB Corporation:

Accepted Answer

The answer of RWB Corporation, a U.S.based company, bought inventory...

Question 13

RWB Corporation, a U.S.based company, sold inventory to a German company on June 5 for 12,000 euros, when $1 was equal to 1.20 euros.The company received 12,000 euros in payment on August 4 when $1 was equal to 1.25 euros.RWB's measurement currency is the U.S.dollar.RWB Corporation:

Accepted Answer

RWB Corporation is exposed to an economic loss because the exchange rate changed unfavorably from 1.20 euros per dollar to 1.25 euros per dollar, resulting in fewer dollars received when the payment was made.

Question 14

Forward Contracts:
Calculate the gain or loss to the holder and to the writer of the forward contract who agrees to buy foreign currencies
at a specific price.Assume that on May 1, the writer of the forward contract agrees to sell 3,000,000 foreign currencies at a specific price of $0.22 per foreign currency (FC) with delivery in 30 days (May 31).Assume the spot rate at the end of the forward period is $0.20.
What is the entry to the holder on May 1.
Explain how the value of the forward contract changes over time.

Accepted Answer

The answer of Forward Contracts:
Calculate the gain or loss to...

Question 15

Describe the concept of convergence as it pertains to the FASB and IASB and describe the ways in which this may be accomplished.

Accepted Answer

The answer of Describe the concept of convergence as it...

Question 16

Which of the following factors has not influenced the development of accounting practices in various nations?

Accepted Answer

All of these factors (political environment, economic development, and cultural background) have influenced the development of accounting practices in various nations.

Question 17

Which of the following is not a responsibility of the International Accounting Standards Board (IASB)?

Accepted Answer

The IASB is responsible for establishing and promoting the use of international financial reporting standards (IFRS) for use in the preparation of financial statements. It also aims to achieve convergence between national accounting standards and IFRS. However, it is not responsible for advising political bodies to enact legislation regulating international business.

Quiz 9: The International Accounting Environment