Chapter 12

Question 1

local currency unit

Answer 1

the legal tender in the country or jurisdiction of the business

Question 2

recording currency

Answer 2

the currency in which the company records its transactions

Question 3

reporting currency

Answer 3

the currency in which the financial reports will be presented to the stakeholders

Question 4

translation adjustment

Answer 4

the in balance between the different rates at different times

Question 5

current rate

Answer 5

the exchange rate at the end of the trading day on the balance sheet date

Question 6

historical rate

Answer 6

the exchange rate that existed when an initial transaction took place, such as the exchange rate on the date an asset was acquired for a liability was the incurred

Question 7

average rate

Answer 7

a simple average for a period of time and is usually the exchange rate used to measure revenues and expenses

Question 8

functional currency

Answer 8

the currency of the primary economic environment in which the entity operates, the currency the entity generates and receives cash

Question 9

highly inflationary economies

Answer 9

US dollar

Question 10

translation

Answer 10

most common method
Revenue and expenses items = average rate
Assets and liabilities = Current exchange rate
Stockholders Equity = Historical rate

Question 11

remeasurement

Answer 11

only required when the entity’s functional currency is different than the local currency
note: translation must occur if the functional currency is not US currency

Question 12

current rate method

Answer 12

method used to translate financial statements from local into US dollars

Question 13

temporal method

Answer 13

method used to remeasure the financial statements from the local currency to the functional currency

Question 14

translation adjustment

Answer 14

the item on the bottom of the trial balance to make the debits equal the credits

Question 15

comprehensive income

Answer 15

includes other comprehensive income

Question 16

other comprehensive income

Answer 16

items that are part of the changes in the net assets of a business enterprise from nonowner sources

Question 17

accumulated other comprehensive income

Answer 17

OCI is closed to this every period and it is included in a portion of equity displayed separately from stockholders equity

Question 18

remeasurement gain or loss

Answer 18

balancing item when remeasuring currency included in income rather than OCI

Question 19

monetary assets and liabilities

Answer 19

have their amounts fixed

cash, A/P

Question 20

nonmonetary assets

Answer 20

accounts such as inventories and plant and equipment, which are not fixed in relation to monetary units

Question 21

remeasurement of securities

Answer 21

current rate

Question 22

remeasurement rates

Answer 22

monetary assets: current rate

nonmonetary assets: historical rate

Question 23

nonmonetary items remeasurement

Answer 23

marketable securities:
 equity securities
 debt securities
Inventories
Prepaid Expenses
PP&E
Accum Depr on PP&E
Patents, etc
goodwill
other intangible assets
deferred charges and credits except deferred income taxes and policy acquisition costs for life insurance companies
deferred income
common stock
preferred stock carried at issuance price
Revenues and expenses related to nonmonetary
COGS
Depr
Amortization of intangibles
Amortization of deferred charges or credits
all of these are remeasured at historical cost