Advanced Financial ACCT Exam 2.
Newest 2026-2027. Questions and
Correct Answers. Graded A
A foreign subsidiary uses the first-in first-out inventory method. The
following inventory balances are given at December 31, 2021 in local
currency units (LCU):
Inventory at cost - 320,000LCU
Inventory at net realizable value - 420,000LCU
The following exchange rates are given for 2021:
4th quarter average, 2021 - $1.43=1LCU
December 31, 2021 - 1.42=1LCU
Compute the December 31, 2021, inventory balance using the current rate
method.
a. $454,400.
b. $457,600.
c. $596,400.
d. $419,000.
e. $321,000. - ANSa. $454,400.
1
,320,000 * 1.42
A foreign subsidiary uses the first-in first-out inventory method. The
following inventory balances are given at December 31, 2021 in local
currency units (LCU):
Inventory at cost - 320,000LCU
Inventory at net realizable value - 420,000LCU
The following exchange rates are given for 2021:
4th quarter average, 2021 - $1.43=1LCU
December 31, 2021 - 1.42=1LCU
Compute the December 31, 2021, inventory balance using the lower of cost
or net realizable value method under the temporal method.
a. $321,000.
b. $457,600.
c. $596,400.
d. $454,400.
e. $419,000. - ANSb. $457,600.
320,000 * 1.43
420,000 * 1.42
2
,report the lower of the two
A highly inflationary economy is defined as
a. Cumulative 5-year inflation in excess of 100%.
b. Cumulative 3-year inflation in excess of 100%.
c. Cumulative 5-year inflation in excess of 90%.
d. Cumulative 3-year inflation in excess of 90%.
e. Any country designated as a company operating in a third-world
economy. - ANSb. Cumulative 3-year inflation in excess of 100%.
A net asset balance sheet exposure exists and the foreign currency
appreciates. Which of the following statements is true?
a. There is no translation adjustment.
b. There is a transaction loss.
c. There is a transaction gain.
d. There is a negative translation adjustment.
e. There is a positive translation adjustment. - ANSe. There is a positive
translation adjustment.
A net asset balance sheet exposure exists and the foreign currency
depreciates. Which of the following statements is true?
a. There is no translation adjustment.
b. There is a transaction loss.
c. There is a transaction gain.
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, d. There is a negative translation adjustment.
e. There is a positive translation adjustment. - ANSd. There is a negative
translation adjustment.
A net liability balance sheet exposure exists and the foreign currency
appreciates. Which of the following statements is true?
a. There is no translation adjustment.
b. There is a transaction loss.
c. There is a transaction gain.
d. There is a negative translation adjustment.
e. There is a positive translation adjustment. - ANSd. There is a negative
translation adjustment.
A net liability balance sheet exposure exists and the foreign currency
depreciates. Which of the following statements is true?
a. There is no translation adjustment.
b. There is a transaction loss.
c. There is a transaction gain.
d. There is a negative translation adjustment.
e. There is a positive translation adjustment. - ANSe. There is a positive
translation adjustment.
A subsidiary of Dunder Inc., a U.S. company, was located in a foreign
country. The functional currency of this subsidiary was the Stickle (§) which
is the local currency where the subsidiary is located. The subsidiary
4
Newest 2026-2027. Questions and
Correct Answers. Graded A
A foreign subsidiary uses the first-in first-out inventory method. The
following inventory balances are given at December 31, 2021 in local
currency units (LCU):
Inventory at cost - 320,000LCU
Inventory at net realizable value - 420,000LCU
The following exchange rates are given for 2021:
4th quarter average, 2021 - $1.43=1LCU
December 31, 2021 - 1.42=1LCU
Compute the December 31, 2021, inventory balance using the current rate
method.
a. $454,400.
b. $457,600.
c. $596,400.
d. $419,000.
e. $321,000. - ANSa. $454,400.
1
,320,000 * 1.42
A foreign subsidiary uses the first-in first-out inventory method. The
following inventory balances are given at December 31, 2021 in local
currency units (LCU):
Inventory at cost - 320,000LCU
Inventory at net realizable value - 420,000LCU
The following exchange rates are given for 2021:
4th quarter average, 2021 - $1.43=1LCU
December 31, 2021 - 1.42=1LCU
Compute the December 31, 2021, inventory balance using the lower of cost
or net realizable value method under the temporal method.
a. $321,000.
b. $457,600.
c. $596,400.
d. $454,400.
e. $419,000. - ANSb. $457,600.
320,000 * 1.43
420,000 * 1.42
2
,report the lower of the two
A highly inflationary economy is defined as
a. Cumulative 5-year inflation in excess of 100%.
b. Cumulative 3-year inflation in excess of 100%.
c. Cumulative 5-year inflation in excess of 90%.
d. Cumulative 3-year inflation in excess of 90%.
e. Any country designated as a company operating in a third-world
economy. - ANSb. Cumulative 3-year inflation in excess of 100%.
A net asset balance sheet exposure exists and the foreign currency
appreciates. Which of the following statements is true?
a. There is no translation adjustment.
b. There is a transaction loss.
c. There is a transaction gain.
d. There is a negative translation adjustment.
e. There is a positive translation adjustment. - ANSe. There is a positive
translation adjustment.
A net asset balance sheet exposure exists and the foreign currency
depreciates. Which of the following statements is true?
a. There is no translation adjustment.
b. There is a transaction loss.
c. There is a transaction gain.
3
, d. There is a negative translation adjustment.
e. There is a positive translation adjustment. - ANSd. There is a negative
translation adjustment.
A net liability balance sheet exposure exists and the foreign currency
appreciates. Which of the following statements is true?
a. There is no translation adjustment.
b. There is a transaction loss.
c. There is a transaction gain.
d. There is a negative translation adjustment.
e. There is a positive translation adjustment. - ANSd. There is a negative
translation adjustment.
A net liability balance sheet exposure exists and the foreign currency
depreciates. Which of the following statements is true?
a. There is no translation adjustment.
b. There is a transaction loss.
c. There is a transaction gain.
d. There is a negative translation adjustment.
e. There is a positive translation adjustment. - ANSe. There is a positive
translation adjustment.
A subsidiary of Dunder Inc., a U.S. company, was located in a foreign
country. The functional currency of this subsidiary was the Stickle (§) which
is the local currency where the subsidiary is located. The subsidiary
4
