Solutions for International Accounting
1.Which of the following groups is a supranational organization?
A. United Nations
B. Organization for Economic Cooperation and Development
C. International Federation of Accountants
D. All of the above - ANSWERSD.All of the above
In which of the following levels can international accounting be defined?
A. Supranational organizations
B. Company
C. Country
D. All of the above - ANSWERSD. All of the above
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 - ANSWERSB. Foreign exchange risk
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. - ANSWERSA. business transactions are
denominated in foreign currencies.
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. - ANSWERSB. hedging.
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 the above - ANSWERSD. All of the above
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 - ANSWERSA. As an adjustment to stockholders' equity
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 - ANSWERSC. Consolidation
Which of the following statements is true about U.S. taxation of foreign subsidiaries?
A. The U.S. income taxes income generated by subsidiaries incorporated in foreign countries.
B. U.S. multinationals do not pay tax on their worldwide income if incorporated in the U.S.
C. Transfer pricing will eliminate taxes by the U.S. government on multinational corporations.
D. U.S. tax on foreign operations does not have to be paid until the income is brought back to
the U.S. - ANSWERSD. U.S. tax on foreign operations does not have to be paid until the income is
brought back to the U.S.
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 the above - ANSWERSD.All of the above
1.Which of the following groups is a supranational organization?
A. United Nations
B. Organization for Economic Cooperation and Development
C. International Federation of Accountants
D. All of the above - ANSWERSD.All of the above
In which of the following levels can international accounting be defined?
A. Supranational organizations
B. Company
C. Country
D. All of the above - ANSWERSD. All of the above
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 - ANSWERSB. Foreign exchange risk
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. - ANSWERSA. business transactions are
denominated in foreign currencies.
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. - ANSWERSB. hedging.
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 the above - ANSWERSD. All of the above
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 - ANSWERSA. As an adjustment to stockholders' equity
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 - ANSWERSC. Consolidation
Which of the following statements is true about U.S. taxation of foreign subsidiaries?
A. The U.S. income taxes income generated by subsidiaries incorporated in foreign countries.
B. U.S. multinationals do not pay tax on their worldwide income if incorporated in the U.S.
C. Transfer pricing will eliminate taxes by the U.S. government on multinational corporations.
D. U.S. tax on foreign operations does not have to be paid until the income is brought back to
the U.S. - ANSWERSD. U.S. tax on foreign operations does not have to be paid until the income is
brought back to the U.S.
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 the above - ANSWERSD.All of the above
