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International Business and Trade > [SOURCE] Midterms > Flashcards

[SOURCE] Midterms Flashcards

1
Q

An entity started trading in country A, whose currency was the dollar. After several years, the entity expanded and exported its product to country B, whose currency was the euro. The business was conducted through a subsidiary in country B. The subsidiary is essentially an extension of the entity’s own business, and the directors of the two entities are common. The functional currency of the subsidiary is

a. the euro
b. the dollar
c. the dollar or the euro
d. difficult to determine

A

b. the dollar

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2
Q

The exchange rate is

a. the ratio of exchange for two currencies
b. the spot exchange rate at the end of the reporting period
c. the exchange rate for immediate delivery
d. the difference resulting from translating a given number of one currency into another currency at different exchange rates

A

a. the ratio of exchange for two currencies

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3
Q

Exchange differences arising from foreign currency transactions shall

a. be recognized in profit or loss in which they arise
b. be included in other comprehensive income
c. be deferred and amortized over a reasonable period
d. be charged to retained earnings

A

a. be recognized in profit or loss in which they arise

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4
Q

It is the currency of the primary economic environment in which an entity operates.

a. reporting currency
b. functional currency
c. presentation currency
d. foreign currency

A

b. functional currency

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5
Q

The accounting for the effects of foreign currencies on financial statements is prescribed under which standard?

a. PAS 12
b. PFRS 21
c. PFRS 9
d. PAS 21

A

d. PAS 21

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6
Q

Upon arrival in Chile, Karen exchanged $1,000 of US currency into 480,000 Chilean pesos. While returning after her two-month visit, she exchanged her remaining 50,000 pesos into $100 US currency. What amount of gain (loss) did Karen experience on the 50,000 pesos she held during her visit and converted to US dollars at the departure date?

a. loss of $4
b. gain of $4
c. loss of $6
d. no gain or loss

A

a. loss of $4

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7
Q

On September 3, 20x8, Nuggets Corporation purchases goods for a US dollar equivalent of $17,000 from a Swiss company. The transaction is denominated in Swiss francs (SFr). The payment is made on October 10. The exchange rates were: September 3: 1 Swiss franc = $0.85; October 10: 1 Swiss franc = $0.90. What entry is required to revalue the foreign currency payable to US dollar equivalent value on October 10?

a. Dr FC Transaction loss 1,000; Cr Accounts Payable (SFr) 1,000
b. Dr Accounts Payable (SFr) 850; Cr FC Transaction Gain 850
c. Dr FC Transaction loss 850; Cr Accounts Payable (SFr) 850
d. Dr Accounts Payable (SFr) 1000; Cr FC Transaction Gain 1000

A

a. Dr FC Transaction loss 1,000; Cr Accounts Payable (SFr) 1,000

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8
Q

On December 5, 20x8, Texas-based Mavericks Corp. purchased foods from a Saudi Arabian firm for 100,000 riyals (SAR) to be paid on January 10, 20x9. The transaction is denominated in Saudi riyals. Mavericks’ fiscal year ends on December 31, and its reporting currency is the US dollar. The exchange rates are: December 5, 20x8: 1 riyal = $0.265; December 31, 20x8: 1 riyal = $0.262; January 10, 20x9: 1 riyal = $0.264.

Based on the information, what journal entry would Mavericks make on December 31, 20x8, to revalue the foreign currency payable to its equivalent US dollar value?

a. [Dr] Accounts Payable (SAR) 300; [Cr] FC Transaction gain 300

b. [Dr] Accounts Payable (SAR) 100; [Cr] FC Transaction gain 100

c. [Dr] FC Transaction loss 300; [Cr] Accounts Payable (SAR) 300

d. [Dr] FC Transaction loss 200; [Cr] Accounts Payable (SAR) 200

A

a. [Dr] Accounts Payable (SAR) 300; [Cr] FC Transaction gain 300

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9
Q

On December 5, 20x8, Texas-based Mavericks Corp. purchased foods from a Saudi Arabian firm for 100,000 riyals (SAR) to be paid on January 10, 20x9. The transaction is denominated in Saudi riyals. Mavericks’ fiscal year ends on December 31, and its reporting currency is the US dollar. The exchange rates are: December 5, 20x8: 1 riyal = $0.265; December 31, 20x8: 1 riyal = $0.262; January 10, 20x9: 1 riyal = $0.264.

Based on the information given, what journal entry would Mavericks make on January 10, 20x9, to revalue the foreign currency payable to its equivalent US dollar value?

a. [Dr] Accounts Payable (SAR) 300; [Cr] FC Transaction gain 300

b. [Dr] Accounts Payable (SAR) 100; [Cr] FC Transaction gain 100

c. [Dr] FC Transaction loss 100; [Cr] Accounts Payable (SAR) 100

d. [Dr] FC Transaction loss 200; [Cr] Accounts Payable (SAR) 200

A

d. [Dr] FC Transaction loss 200; [Cr] Accounts Payable (SAR) 200

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10
Q

On December 5, 20x8, Texas-based Mavericks Corp. purchased foods from a Saudi Arabian firm for 100,000 riyals (SAR) to be paid on January 10, 20x9. The transaction is denominated in Saudi riyals. Mavericks’ fiscal year ends on December 31, and its reporting currency is the US dollar. The exchange rates are: December 5, 20x8: 1 riyal = $0.265; December 31, 20x8: 1 riyal = $0.262; January 10, 20x9: 1 riyal = $0.264.

Based on the preceding information, what was the overall foreign currency gain or loss on the accounts payable transaction?

Based on the preceding information, what was the overall foreign currency gain or loss on the accounts payable transaction?

a. $200 gain
b. $100 gain
c. $300 loss
d. $200 loss

A

c. $300 loss

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11
Q

Detroit-based Pistons Corporation purchased ancillaries from a Japanese firm on December 1, 20x8, for 1 million yen when the spot rate for yen was $0.0095. On December 31, 20x8, the spot rate stood at $0.0096. On January 10, 20x9, Pistons paid 1 million yen acquired at a rate of $0.0094. Pistons’ income statements should report a foreign exchange gain or loss for the years ended December 31, 20x8, and 20x9 of:

a. $0; $0
b. $100 loss; $200 gain
c. $0; $100 gain
d. $100 gain; $100 loss

A

b. $100 loss; $200 gain

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12
Q

Initially, a foreign currency transaction shall be recorded by applying to the foreign currency amount:

a. the spot exchange rate at the date of the transaction
b. the closing rate at the end of the reporting period
c. the average exchange rate during the year
d. the spot exchange rate at the date of the settlement of the transaction

A

a. the spot exchange rate at the date of the transaction

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13
Q

These are money held, financial assets to be received, and financial liabilities to be paid in fixed or determinable amounts of money:

a. foreign currency loans
b. monetary items
c. long-term items
d. nonmonetary items

A

b. monetary items

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14
Q

Nonmonetary items that are measured in terms of historical cost denominated in a foreign currency shall be reported using the:

a. spot exchange rate
b. closing rate
c. exchange rate at the date of transaction
d. average rate

A

c. exchange rate at the date of transaction

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15
Q

Monetary items are:

a. cash only
b. cash and bank balance
c. cash, short-term receivables, and marketable securities
d. money held, assets receivable, and liabilities payable, in fixed or determinable amounts of cash or cash equivalents

A

d. money held, assets receivable, and liabilities payable, in fixed or determinable amounts of cash or cash equivalents

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16
Q

Many companies have set up production plants in other countries like Singapore to take advantage of labor cost savings. This is an example of:

a. international diversification
b. use of economic resources
c. utilize technology
d. none

A

b. use of economic resources

17
Q

This highlights the importance of sustainable production methods and non-conventional energy resources for your production process. This is related to:

a. payrolling challenges
b. brand consistency
c. new market competition
d. environmental issues on a global level

A

d. environmental issues on a global level

18
Q

A problem in international business wherein the particulars of imports, exports, offshore shipping, and related logistics are steered by international laws and other foreign legislations is related to:

a. supply chain risks
b. talent acquisition and onboarding
c. nuances of foreign policies, geopolitics, and cross-country relations
d. compliance issues

A

a. supply chain risks

19
Q

Following are methods that will help one reduce the international business challenges except:

a. inculcate cultural sensitivity in your reach-out and operations
b. carry out thorough research on employment laws and work permits in the local country
c. brand consistency
d. all of these are methods that will help one reduce the international business challenges

A

c. brand consistency

20
Q

Employing a local to verify the correctness and compliance of these contracts is one way to solve this problem in international business:

a. managing globally distributed teams
b. cultural variations
c. language obstacles
d. supply chain risks

A

c. language obstacles

21
Q

A transaction gain or loss at the settlement date is:

a. a change in the exchange rate quoted by a foreign exchange rate
b. synonymous with the translation of foreign currency financial statements into dollars
c. the difference between the recorded dollar amount of an account receivable denominated in a foreign currency and the amount of dollars received
d. the difference between the buying and selling rate quoted by a foreign exchange trader at the settlement date

A

c. the difference between the recorded dollar amount of an account receivable denominated in a foreign currency and the amount of dollars received

22
Q

Northport Inc., a Philippine company, had the following foreign currency transactions during 2030:

Inventory was purchased from a foreign supplier on January 20, 2030 for the Philippine peso equivalent of P90,000. The invoice was paid on March 20, 2030 at the peso equivalent of P96,000.

On July 1, 2030, Northport borrowed the peso equivalent of P500,000, evidenced by a note that was payable in the lender’s local currency on July 1, 2032. On December 31, 2030, the Philippine peso equivalents of the principal amount and accrued interest were P520,000 and P26,000, respectively. Interest on the note is 10% per annum.

In Northport’s 2030 income statement, what amount should be included as foreign currency transaction loss as part of net income?

a. P0
b. P6,000
c. P21,000
d. P27,000

A

d. P27,000

23
Q

FiberXers acquired a computer for $100,000 when the exchange rate was P1 = $20. FiberXers reported a foreign exchange loss of P15,000 in its 2030 financial statement and a foreign exchange gain of P10,000 in its 2031 financial statements.

What is the exchange rate on December 31, 2030?

a. P1 = 19.85
b. $1 = P20.15
c. $1 = P0.20
d. none of these

A

c. $1 = P0.20

24
Q

FiberXers acquired a computer for $100,000 when the exchange rate was P1 = $20. FiberXers reported a foreign exchange loss of P15,000 in its 2030 financial statement and a foreign exchange gain of P10,000 in its 2031 financial statements.

What is the amount of the computer on the December 31, 2030 statement of financial position?

a. P2,000,000
b. P2,015,000
c. P5,000
d. P20,000

A

c. P5,000

25
Q

FiberXers acquired a computer for $100,000 when the exchange rate was P1 = $20. FiberXers reported a foreign exchange loss of P15,000 in its 2030 financial statement and a foreign exchange gain of P10,000 in its 2031 financial statements.

The exchange rate on the settlement date is:

a. P1 = $0.10
b. P1 = $20.05
c. $1 = P20.15
d. P1 = $10

A

c. $1 = P20.15

26
Q

FiberXers acquired a computer for $100,000 when the exchange rate was P1 = $20. FiberXers reported a foreign exchange loss of P15,000 in its 2030 financial statement and a foreign exchange gain of P10,000 in its 2031 financial statements.

**How much is the cost of the computer on the December 31, 2031 statement of financial position?
**
a. P10,000
b. P20,000
c. P5,000
d. P2,000,000

A

c. P5,000

27
Q

FiberXers acquired a computer for $100,000 when the exchange rate was P1 = $20. FiberXers reported a foreign exchange loss of P15,000 in its 2030 financial statement and a foreign exchange gain of P10,000 in its 2031 financial statements.

**
How much is the total accounts payable on December 31 statement of financial position?**

a. P20,000
b. P2,015,000
c. P5,000
d. P2,000,000

A

a. P20,000

International Business and Trade (4 decks)

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