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Solutions for Advanced Financial Accounting Part II (1st edition by Nathalie Johnstone)
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Solutions for Advanced Financial Accounting Part II (1st edition by Nathalie Johnstone)
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Solutions for Advanced FinancialAccounting Part II (1st edition by
Nathalie Johnstone)
Which of the following best describes the effects of foreign currency fluctuations on the financial
statements of companies with foreign currency-denominated assets and liabilities? -
ANSFluctuations in the $US value of foreign currency-denominated assets and liabilities affect
BOTH THE BALANCE SHEET AND THE INCOME STATEMENT.
Companies invest in financial derivatives: - ANSTo reduce exposure to currency-related risks
If a company reports a RECEIVABLE denominated in Euros (€) and the $US weakens vis-à-vis
the Euro: - ANSThe company WILL ACCRUE THE GAIN in its financial statements as of the
statement date, even before the receivable is collected.
In recent years, the $US has - ANSWeakened with respect to MOST MAJOR WORLD
CURRENCIES.
If a company reports a PAYABLE denominated in Euros (€) and the $US weakens vis-à-vis the
Euro: - ANSThe company WILL ACCRUE the LOSS in its financial statements as of the
statement date, even before the payable is paid.
Which of the following best describes current GAAP with respect to the required reporting
currency? - ANSA currency OTHER THAN THE U.S. DOLLAR may be the reporting currency in
financial statements.
Assume that the $US has weakened with respect to the Euro and that we have a
Euro-denominated payable. - ANSOur company will ACCRUE A LOSS ON THE STATEMENT
DATE.
Which of the following best describes the accounting for foreign currency-denominated
receivables and payables? - ANSCompanies are required to ACCRUE GAINS AND LOSSEES
on foreign currency-denominated receivables and payments as of the statement date.
Assume that our company incurs a Euro-denominated payable when the exchange rate is
$1.40:€1 and that the $US weakens to $1.45:€1 before the payable is paid. - ANSOur company
WILL RECOGNIZE THE LOSS on its next statement date.
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