#8

Question 1

Nominal dollar

Answer 1

Unadjusted for changes in purchasing power

Question 2

Constant dollar

Answer 2

Dollar restated based on calculations of CPI ratios

Question 3

Current cost

Answer 3

Replacement cost

Question 4

Historic cost

Answer 4

cost at the time when asset was acquired or liability assumed

Question 5

Is accumulated depreciation of equipment nonmonetary?

Answer 5

YES. Depreciation related to PP&E are nonmonetary

Question 6

How to measure murrent cost amount of inventory and PPE

Answer 6

measured at current cost or lower recoverable amount at the measurement date

Question 7

Gains and losses from foreign exchange transactions that are an “extension” of the parent’s domestic operation

Answer 7

Component of income from continuing operation

Question 8

Gains or loss from remeasuring the foreign subsidiary’s financial statement from local currency to the functional currency, where does it go?

Answer 8

Income from continuing operations of the parent company. Basically it goes into net income

Question 9

Gains or loss from translation adjustments, where does it go?

Answer 9

As component of accumulated other comprehensive income in consolidated equity until disposed of

Question 10

Rate to be used to translate all assets and all liabilities from the functional currency to the reporting currency

Answer 10

Current rate

Question 11

Under translation (current rate) method, what is the exchange rate that is used to translate all income statement items such as salaries expense and sales to external customers.

Answer 11

weighted average exchange rate

Question 12

What happens when a foreign currency transaction is not settled at year-end

Answer 12

a transaction gain or loss must be reported on the year-end income statement. So the transaction completed next year will be compared against the transaction gain or loss on the year-end income statement.

Question 13

What exchange rate is used when a company is converting foreign currency that is the local currency to reporting currency?

Answer 13

Average exchange rate

Question 14

When the translation method is used, how does common stock and additional paid-in capital differ from assets and liabilities?

Answer 14

Assets and liabilities are translated using the current rate

Common stocks and additional paid-in capital are translated using historical exchange rate

Question 15

Difference between foreign transaction gain(loss) and foreign translation gain(loss)?

Answer 15

Foreign transaction gain(loss) is recorded in income from continuing operation.
Foreign translation gain(loss) is recorded in other comprehensive income .

Question 16

How should a transaction denominated in a foreign currency be recorded on the date of the transaction?

Answer 16

At the spot rate on the date of the transaction.

Question 17

On personal financial statements, how are assets and liabilities valued?

Answer 17

At fair market value

Question 18

Net assets are presented at what value?

Answer 18

At fair market value. So an individual’s business interest should be reported at the estimated current value.

Question 19

Bonus to officers in year 1 were paid in year 2, how do you account for the bonus

Answer 19

Add the bonus to compensation expense in year 1, because it’s bonus FOR year 1. Service already rendered, doesn’t matter if it’s not paid out until year 2.

Question 20

Gains or loss on fixed assets (include involuntary conversions) are always recognized during the period based on what?

Answer 20

record amount (BV) plus any costs associated with the transaction.