Question 1

A dollar that is stronger than the British pound would make travel to the United States more attractive to British citizens.

Accepted Answer

A stronger dollar compared to the British pound means it would be more expensive for British citizens to exchange their pounds for dollars, making travel to the United States less attractive due to higher costs.

Question 2

An International joint venture is:

Accepted Answer

An international joint venture is a business arrangement where two or more companies from different countries come together to form a new entity, sharing ownership, control, and profits.

Question 3

Making accurate estimates of costs is a challenge for global companies.

Accepted Answer

Global companies face various factors such as currency fluctuations, geopolitical risks, and market volatility that can affect their cost estimates. Due to these uncertainties, making accurate cost estimates can be a challenge for these companies.

Question 4

Multicountry tax laws do not affect the cost of doing business in global markets.

Accepted Answer

Multicountry tax laws can significantly affect the cost of doing business in global markets as they may require companies to comply with various regulations and pay taxes in different jurisdictions, which can increase administrative and operational costs. Additionally, tax rates and incentives may also vary across different countries, impacting a company's profitability and competitiveness in those markets.

Question 5

On November 1, a French company purchased machinery from an American company for 800,000 euros when the exchange rate was $0.83. When preparing financial statements on December 31, assuming the rate for Euros was $0.88, what amount of gain or loss should the American company report?

Accepted Answer

The American company initially recorded the sale at $664,000 (800,000 euros x $0.83). By December 31, the value of the euros increased to $704,000 (800,000 euros x $0.88). The difference of $40,000 ($704,000 - $664,000) is a gain.

Question 6

An increase in the exchange rate between a transaction date and the date of payment will cause the debtor to incur a loss.

Accepted Answer

When the exchange rate increases, it means the debtor's local currency has depreciated against the foreign currency. Therefore, the debtor will have to pay more in their local currency to settle the same amount of foreign currency debt, resulting in a loss.

Question 7

"Convergence" means abandoning a country's financial reporting standards and replacing them with the International financial Reporting Standard.

Accepted Answer

Convergence refers to the process of harmonizing a country's financial reporting standards with the International Financial Reporting Standards (IFRS), not replacing them entirely.

Question 8

To convert a dollar amount into a foreign currency divide the dollar amount by the exchange rate.

Accepted Answer

This is the correct formula to convert a dollar amount into a foreign currency.

Question 9

Accounting practices are affected by all of the following except:

Accepted Answer

Accounting practices may be influenced by political systems, economic systems, technology, and infrastructure. However, the management's knowledge of accounting practices does not have any affect on accounting practices themselves.

Question 10

Establishing international accounting standards is the responsibility of:

Accepted Answer

The International Accounting Standards Board (IASB) is responsible for establishing international accounting standards, also known as International Financial Reporting Standards (IFRS). The Securities and Exchange Commission (SEC) adopts these standards for use by U.S. public companies, but it is not responsible for establishing them. The Financial Accounting Standards Board (FASB) sets accounting standards for the United States, not internationally. The Accounting Association of America does not play a role in setting accounting standards.

Question 11

A U. S. public corporation's decision to globalize impacts all of following except:

Accepted Answer

A corporation's decision to globalize will impact their internal procedures, production processes, and accounting outputs as they navigate different markets and regulations. However, it will not directly impact who owns stock in the company.

Question 12

"Adoption" means replacing current financial reporting standards with International Financial Reporting Standards.

Accepted Answer

Adoption refers to the process of replacing current financial reporting standards with International Financial Reporting Standards (IFRS).

Question 13

Accounting as a profession did not exist in England prior to 1988.

Accepted Answer

Accounting has been a recognized profession for centuries, dating back to ancient civilizations such as Greece and Rome. In England, accounting as a profession has existed since the 19th century, with the establishment of accounting societies and associations such as the Institute of Chartered Accountants in England and Wales (ICAEW) in 1880.

Question 14

Gains and losses from fluctuations in exchange rates should be shown on the:

Accepted Answer

Gains and losses from fluctuations in exchange rates should be recognized in the income statement as they are related to the company's operational activities. The balance sheet captures the assets and liabilities at a point in time, and the statement of changes in owners' equity shows the changes in owner's interest over a period of time. The statement of cash flows shows the cash inflows and outflows from operating, investing, and financing activities, but it does not specifically capture gains and losses from fluctuations in exchange rates.

Question 15

China, Japan, and Australia have amended their current standards to converge with International Financial Reporting Standards, but the United States has chosen not to adopt the International Financial Reporting Standards.

Accepted Answer

The answer of China, Japan, and Australia have amended their...

Question 16

Future contracts are used by companies to hedge against losses in foreign currencies.

Accepted Answer

Future contracts allow companies to lock in a specific exchange rate for a future date, protecting them from potential losses if the exchange rate fluctuates unfavorably.

Question 17

As foreign exchange rates fall, importers based in the United States will lose and exporters will gain.

Accepted Answer

When foreign exchange rates fall, it means that the U.S. dollar is strengthening against foreign currencies. This scenario makes imported goods cheaper for U.S. importers, benefiting them. Conversely, U.S. exporters may find it harder to sell their goods abroad as their products become more expensive in foreign markets, potentially losing competitive edge.

Question 18

To convert a foreign currency into dollars, divide the foreign currency by the foreign exchange rate.

Accepted Answer

The answer of To convert a foreign currency into dollars,...

Question 19

Companies choose a standard exchange rate to compute the cost buildup in their domestic currency.

Accepted Answer

Companies typically choose a standard exchange rate (such as spot rate or forward rate) to convert the cost of goods or services in foreign currency into their domestic currency. This helps in computing the cost buildup and making strategic decisions related to pricing and profitability.

Question 20

An international joint venture is a company owned by two or more companies from different countries.

Accepted Answer

An international joint venture refers to a business partnership between two or more companies based in different countries.

Quiz 15: Global Business and Accounting