Midterm Answers

Topics: Balance sheet, International Financial Reporting Standards, Financial statements Pages: 13 (2742 words) Published: October 13, 2012
Selected Topics in Acct: Combined Entities, Multinational, Government and Nonprofit Accounting Module Exam 1
Dr. Dori Lombard

This Module Exam 1 covers chapters 1, 2, 4, 5, 7, 8, and 10. The exam consists of 40 multiple choice questions. There are a total of 100 points in the exam. The exam is 20% of your overall course grade. Complete your work on a Word document, save it, and attach it to Assignments. The exam is open book, which means that you may refer to the text, lectures, your notes, conference posts, and other course materials presented in WebTycho for this class. You may not use Library services or the internet to research questions. This exam is an individual assignment – meaning that you must work alone on this exam. Collaboration (working with others in the class or outside of class) is NOT allowed on this exam. Under no circumstances should you seek the aid of another person. Nor should you provide such aid to others. All policies in the syllabus that relate to standards for submission for graduate-level work and course specific grading policies, including policies on plagiarism and other academic misconduct apply to this exam. Good luck!

Chapter 1:
1. As used in international accounting, a “hedge” is:
A)a business transaction made to reduce the exposure of foreign exchange risk.
B)the legal barrier between the various divisions of a multinational company.
C)the loss in US $ resulting from a decline in the value of the US $ relative to foreign currencies.
D)one form of foreign direct investment.

Answer: A

2. 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) consolidated financial statements are prepared.
D) hedging foreign currency.

Answer: B

3. 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 method of recording transactions between divisions within the same company
D)The taxes paid on sales in a foreign country

Answer: C

4. The process by which a domestic company sells its stock, already sold on its domestic exchange, on a foreign stock exchange is known as:
A)SEC registration
B)Initial public offering

Answer: D

5. What group is primarily responsible for the creation of International Financial Reporting Standards (IFRS)?
A)Financial Accounting Standards Board (FASB)
B)International Forum on Accountancy Development (IFAD)
C)International Federation of Accountants (IFA)
D)International Accounting Standards Board (IASB)

Answer: D

6. 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 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.

Answer: A
Chapter 2:
7. If most of a country's business financing comes from families, banks, and the government what should we expect in terms of information disclosure to the public?
A)Relatively little because the public isn't a major factor
B)A great deal of disclosure because it will be the only way for interested parties to learn about the company
C)Complete openness of accounting records
D)No disclosure at all

Answer: A
8. In countries such as the U. S., there is great demand for public disclosure of accounting information. What is the reason for this?
A)Corporate management isn't...
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