ADVANCED FINANCIAL ACCOUNTING
FINAL EXAM QUESTIONS AND
ANSWERS GRADED A+ 2025/2026
A US parent has a subsidiary in Singapore. If the parent's functional currency is the US dollar
and the subsidiary's functional currency is the Hong Kong dollar, conversion of the subsidiary's
accounts to US dollars involves - ANS Both remeasurement and translation
When translating a subsidiary's accounts to the parent's reporting currency, which of the
following transactions or adjustments affect its exposure to translation gains and losses? -
ANS Recording amortization expense on intangible assets
When remeasuring a subsidiary's accounts to its functional currency, which of the following
transactions or adjustments affect its exposure to remeasurement gains and losses? -
ANS Equipment purchases
A US parent owns a subsidiary in the UK. The subsidiary purchases equity securities for cash.
How does this transaction affect the subsidiary's exposure to remeasurement or translation
gains or losses? - ANS Neither remeasurement nor translation exposure changes
In the consolidated financial statements, remeasurement gains and losses for an international
subsidiary are reported - ANS In consolidated income
In the consolidated financial statements, translation gains and losses for an international
subsidiary are reported - ANS In consolidated other comprehensive income
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, A US parent has a wholly-owned subsidiary in Switzerland. The subsidiary's accounts are
reported in Swiss francs. Under what circumstances will the US parent translate the subsidiary's
accounts from Swiss francs to US dollars? - ANS The subsidiary's functional currency is the
Swiss franc
A US company has several international subsidiaries, which it converts to US dollars by
remeasuring the subsidiaries' local currency accounts directly into US dollars. Which statement
is true concerning these subsidiaries? - ANS Their functional currency is the US dollar
You are a US parent and you have a subsidiary in Italy. The subsidiary's functional currency is the
euro and it maintains its accounts in euros. When you consolidate the subsidiary, you will -
ANS Translate the subsidiary's trial balance into US dollars then do the consolidation
eliminating entries
You are a US parent and you have a subsidiary in Italy. The subsidiary's functional currency is the
US dollar and it maintains its accounts in euros. When you consolidate the subsidiary, you will -
ANS Remeasure the subsidiary's trial balance into US dollars and then do the consolidation
eliminating entries
How are accounts payable, denominated in another currency, reported on a US company's
balance sheet? - ANS At the exchange rate on the balance sheet date
How are accounts receivable, denominated in another currency, reported on a US company's
balance sheet? - ANS At the rate on the balance sheet
A US company buys inventory from a supplier in Canada and pays for the inventory in Canadian
dollars. The inventory is converted to US dollars on the US company's balance sheet using what
exchange rate? - ANS the rate when the inventory was delivered
A US company sells merchandise to customers in Hong Kong. The merchandise is priced in Hong
Kong dollars, and customers generally take 15 days to pay for the merchandise. The US
company's sales revenue for these sales, reported on its income statement, is expressed in US
dollars converted at - ANS The rate when the sales were made
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
FINAL EXAM QUESTIONS AND
ANSWERS GRADED A+ 2025/2026
A US parent has a subsidiary in Singapore. If the parent's functional currency is the US dollar
and the subsidiary's functional currency is the Hong Kong dollar, conversion of the subsidiary's
accounts to US dollars involves - ANS Both remeasurement and translation
When translating a subsidiary's accounts to the parent's reporting currency, which of the
following transactions or adjustments affect its exposure to translation gains and losses? -
ANS Recording amortization expense on intangible assets
When remeasuring a subsidiary's accounts to its functional currency, which of the following
transactions or adjustments affect its exposure to remeasurement gains and losses? -
ANS Equipment purchases
A US parent owns a subsidiary in the UK. The subsidiary purchases equity securities for cash.
How does this transaction affect the subsidiary's exposure to remeasurement or translation
gains or losses? - ANS Neither remeasurement nor translation exposure changes
In the consolidated financial statements, remeasurement gains and losses for an international
subsidiary are reported - ANS In consolidated income
In the consolidated financial statements, translation gains and losses for an international
subsidiary are reported - ANS In consolidated other comprehensive income
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, A US parent has a wholly-owned subsidiary in Switzerland. The subsidiary's accounts are
reported in Swiss francs. Under what circumstances will the US parent translate the subsidiary's
accounts from Swiss francs to US dollars? - ANS The subsidiary's functional currency is the
Swiss franc
A US company has several international subsidiaries, which it converts to US dollars by
remeasuring the subsidiaries' local currency accounts directly into US dollars. Which statement
is true concerning these subsidiaries? - ANS Their functional currency is the US dollar
You are a US parent and you have a subsidiary in Italy. The subsidiary's functional currency is the
euro and it maintains its accounts in euros. When you consolidate the subsidiary, you will -
ANS Translate the subsidiary's trial balance into US dollars then do the consolidation
eliminating entries
You are a US parent and you have a subsidiary in Italy. The subsidiary's functional currency is the
US dollar and it maintains its accounts in euros. When you consolidate the subsidiary, you will -
ANS Remeasure the subsidiary's trial balance into US dollars and then do the consolidation
eliminating entries
How are accounts payable, denominated in another currency, reported on a US company's
balance sheet? - ANS At the exchange rate on the balance sheet date
How are accounts receivable, denominated in another currency, reported on a US company's
balance sheet? - ANS At the rate on the balance sheet
A US company buys inventory from a supplier in Canada and pays for the inventory in Canadian
dollars. The inventory is converted to US dollars on the US company's balance sheet using what
exchange rate? - ANS the rate when the inventory was delivered
A US company sells merchandise to customers in Hong Kong. The merchandise is priced in Hong
Kong dollars, and customers generally take 15 days to pay for the merchandise. The US
company's sales revenue for these sales, reported on its income statement, is expressed in US
dollars converted at - ANS The rate when the sales were made
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
