Test Bank for International Accounting, 6th Edition by Timothy Doupnik DR ERIC DR ERIC //// DR ERIC Chapter 1:Introduction to International Accoun

Test Bank for International Accounting, 6th Edition by Timothy Doupnik DR ERIC DR ERIC //// DR ERIC Chapter 1:Introduction to International Accounting Chapter 2:Worldwide Accounting Diversity Chapter 3: InternationalConvergence of Financial Reporting Chapter 4:International Financial Reporting Standards: Part I Chapter 5:International Financial Reporting Standards: Part II Chapter 6:Foreign Currency Transactions and Hedging Foreign Exchange Risk Chapter 7:Translation of Foreign Currency Financial Statements Chapter 8:International Taxation Chapter 9:International Transfer Pricing Chapter 10:Management Accounting Issues in Multinational Corporations Chapter 11:Auditing and Corporate Governance: An International Perspective Chapter 12: International SustainabilityReporting 2 DR ERIC DR ERIC Answers Included Chapter 01 6e 1) Which of the following groups is a supranational organization? A) International Accounting Standards Board B) Organization for Economic Cooperation and Development C) International Federation of Accountants D) All of these answers are correct. 2) Determination of net present value involves: A) forecasting future profits and cash flows. B) discounting future cash flows back to their present value. C) analysis on an after-tax basis. D) All of these answers are correct. 3) In which of the following levels can international accounting be defined? A) Supranational organizations B) Company C) Country D) All of these answers are correct. 4) Which of the following functional areas is included in the study of international accounting? A) Financial accounting B) Managerial C) Taxation 3 DR ERIC D) All of these answers are correct. DR ERIC 5) The factor used to convert from one country's currency to another country's currency is called the: A) interest rate. B) cost of capital. C) exchange rate. D) strike price. 4 DR ERIC DR ERIC 6) What is the term used to describe the possibility that a foreign currency will decrease in U.S. dollar value over the life of an asset such as Accounts Receivable? A) Foreign exchange translation B) Foreign exchange risk C) Hedging D) Foreign currency options 7) Foreign exchange risk arises when: A) business transactions are denominated in foreign currencies. B) sales are made to customers in a domestic country. C) goods or services purchased from suppliers in a foreign country are denominated in domestic currency. D) auditing reports are prepared in a foreign currency. 8) In international accounting, a "hedge" is: A) a business transaction made to reduce the exposure of foreign exchange risk. B) the legal barriers in various divisions of a multinational company. C) the loss in US dollar resulting from a decline in the value of the US dollar relative to foreign currencies. D) a form of foreign direct investment. 9) Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called: A) transfer pricing. B) hedging. C) translating. D) cross-listing. 10) What term is used to describe the process of reducing foreign exchange risk? A) International accounting B) Exposure C) Hedging D) Globalization 5 DR ERIC DR ERIC 11) What is the advantage of foreign direct investment? A) Helps in retaining advantage over competition B) Reduces transportation costs C) Creates a company tailored to a foreign market's unique characteristics D) All of these answers are correct. 12) How should we recognize the difference in the value of a receivable in a foreign currency at the time it was recorded and the time the cash was received? A) As an adjustment to stockholders' equity B) As an adjustment to purchases C) As an extraordinary capital expenditure D) As a prior period adjustment 13) What currency is used in the United Kingdom? A) Crown B) Euro C) British pound D) UK dollar 14) Which of these European countries does NOT use the Euro as its domestic currency? A) France B) United Kingdom C) Ireland D) The Netherlands 15) Which of the following terms is used to describe the combining of the financial statements of all subsidiaries, both foreign and domestic, into the financial statements of the parent? A) Convergence B) Hedging C) Consolidation D) Incorporation 6 DR ERIC DR ERIC 16) Why is auditing a multinational corporation potentially more difficult than auditing an entity that has only domestic operations? A) Language differences B) Cultural differences C) Multiple sets of accounting standards D) All of these answers are correct. 17) What is the entry point for most companies into the world of international business? A) Transfer pricing B) Exporting C) Foreign direct investment D) Cross-listing on international stock exchanges 18) For a U.S. multinational corporation, consolidating the financial statements of foreign subsidiaries requires two steps. First, the foreign subsidiary's statements must be restated according to the U.S. GAAP. The next step is to: A) convert the account balances into U.S. dollars. B) determine the exchange rate gain or loss. C) calculate the translation adjustment. D) restate the income using international accounting standards. 19) When setting transfer prices among international subsidiaries, the corporation must: A) make sure that the total tax is minimized. B) ensure that the transfer prices are acceptable to the taxing authorities in the countries involved. C) do whatever it takes to make taxes paid in the United States as low as possible. D) follow the transfer pricing policy used for domestic transfers. 20) What is the primary provision of the Foreign Corrupt Practices Act? A) To specify which corrupt practices are acceptable under U.S. law B) To specify how to account for bribes paid by U.S. corporations to obtain business from foreign governments C) To inform internal auditors how to detect fraud in multinational corporations D) To prohibit U.S. companies from paying bribes to foreign government officials to obtain business 7 DR ERIC DR ERIC 21) What is a key objective of a company's performance evaluation system? A) To determine how much to pay executives in bonuses and other compensation B) To ensure that the domestic and foreign operations are achieving their objectives C) To control foreign subsidiaries D) To assess the effect of foreign exchange rates on published financial statements 22) What is the primary role of internal auditing in a multinational corporation? A) To assist the external auditors in completing the financial statement audit in a timely fashion B) To make sure that employees comply with local customs and traditions C) To ensure that corporate policies and procedures are being followed and to assess operating efficiency D) To prepare the consolidated financial statement of the corporation in compliance with international accounting standards 23) Belmonte Corporation, with a division located in Germany, must translate its financial statements from euros to U.S. dollars. What is the major accounting issue involved in translation? A) Most accountants are not conversant in foreign currency exchange. B) U.S. GAAP may differ from German GAAP. C) The U.S. dollar has been steadily falling relative to the euro. D) The resulting balance sheet may not balance. 24) The ownership and control of foreign assets, such as a manufacturing plant, is called: A) a hedge. B) foreign direct investment. C) an option. D) derivatives. 25) What is a "greenfield" investment? A) Farm land held for speculation B) Foreign direct investment whereby a new facility is constructed abroad C) Purchasing an existing facility as a foreign direct investment D) A foreign investment that has been approved by the Environmental Protection Agency 8 DR ERIC DR ERIC 26) Which of the following is an example of a "greenfield" investment? A) Nike contracts with a footwear company in China to make athletic shoes. B) A Chinese oil company buys a U.S. oil company. C) Toyota, a Japanese automaker, builds an assembly plant in Ohio. D) Daimler, a German automaker, merges with Chrysler, a U.S. automaker. 27) Which of the following is a reason for foreign direct investment? A) To reduce costs of doing business B) To protect domestic markets C) To protect foreign markets D) All of these answers are correct. 28) A translation adjustment may be necessary when: A) notes to financial statements are converted from one language to another. B) foreign currency financial statements are converted to another currency. C) purchasing goods from a domestic company. D) hedging foreign currency. 29) What is "transfer pricing?" A) The cost to convert from one country's GAAP to another country's GAAP B) The value of sales made in a foreign country C) The prices established to record an intercompany sale D) The taxes paid on sales in a foreign country 30) ABCO Corporation has its two wholly owned subsidiaries, Delta and Parry, in Country A and Country B, respectively. Parry purchases a part for its production from Delta. Country B has a higher tax rate than Country A. To minimize the corporation's overall income tax, how should ABCO set its transfer prices between its subsidiaries? A) Delta should sell parts to Parry at low prices. B) Delta should sell parts to Parry at high prices. C) It doesn't matter what transfer price is used because the subsidiaries are part of the same company. D) Transfer pricing does not affect the total tax paid by the corporation.