1.Under the temporal method, the inventory and COGS accounts are both nonmonetary accounts. Which of the following statements is FALSE regarding these accounts? A) If the firm accounts for inventory using FIFO, then a more current rate will be applied to the inventory account. B) If the firm accounts for inventory using LIFO, then the beginning-of-period rate is used to remeasure COGS. C) If the firm accounts for inventory using FIFO, an older rate will be applied to COGS. D) The Inventory account is remeasured using the historical rate under both LIFO and FIFO. The correct answer was B) Under LIFO, the last goods purchased are the first goods out to COGS. Hence, although technically the historical rate is used to remeasure COGS, a more recent rate is typically more appropriate for COGS under LIFO. 2.Which of the following situations does NOT require the use of the temporal method? The: A) foreign subsidiary is operating in a highly inflationary economy. B) local currency is the functional currency. C) local currency is the British pound while the subsidiary's functional currency is the Japanese yen. D) functional currency is some currency other that the local currency or the U.S. dollar. The correct answer was B) The temporal method is not required in the situation when the local currency is the functional currency. 3.Which of the following statements regarding the foreign currency translation under SFAS 52 is FALSE? The functional currency is the: A) parent firm's home currency for self-contained independent foreign subsidiaries. B) subsidiary's local currency for self-contained, independent foreign subsidiaries. C) parent firm's home currency if the foreign subsidiary's operations are well-integrated with those of the parent company. D) parent firm's home currency if the foreign subsidiary operates in a country with high inflation. The correct answer was A) This statement is false, all the other statements are true regarding rules that govern the determination of the functional currency of subsidiaries. 4.Each of the following items is considered a monetary asset or liability account under the temporal method for foreign currency translation EXCEPT: A) accounts payable. B) long-term debt. C) accounts receivable. D) inventory. The correct answer was D) The monetary asset and liability accounts under the temporal method are cash, A/R, A/P, and Long-term debt. 5.Which of the following statements regarding the functional currency under SFAS 52 is FALSE? A) Self-contained, independent subsidiaries whose operations are primarily located in the local market will use the local currency as the functional currency. B) Subsidiaries whose operations are well integrated with the parent will use the parent's currency as the functional currency. C) If a firm operates in a country or environment which is subject to cumulative inflation of 100% or more over a three year period, that firm will use the parent's currency as the functional currency. D) The functional currency is defined as the primary currency of the economic environment in which the parent firm operates. The correct answer was D) The functional currency is defined as the primary currency of the economic environment in which the foreign subsidiary operates. 6.If the functional currency has been determined to be the local currency, then: A) use the temporal method to translate the foreign subsidiary's results. B) use remeasurement to translate the foreign subsidiary's results. C) use the current rate method to translate the foreign subsidiary's results. D) an analyst must remeasure the foreign subsidiary's results to a neighboring country's currency and then translate from that currency into the parent's currency. The correct answer was C) If the functional currency is the local currency, then use the current rate method. Remeasurement is the same thing as the temporal method. | 
发表于 2008-5-12 14:55
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