(Test Bank) International Accounting

Doupnik,Finn,Gotti,Perera, 5

Business

Test Bank

5th Edition

• $15.00 $50.00

---

Description

Test Bank for International Accounting, The downloadable file consists of 306 pages, and the total size of the file is 2.3 MB. Purchase now only for highly discounted price.

Author(s): Doupnik, Finn, Gotti, Perera

---

---

Study Note Preview

1 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. International Accounting, 5e (Doupnik) Chapter 1 Introduction to International Accounting 1) Which of the following groups is a supranational organization? A) International Accounting Standards Board B) Organization for Economic Cooperation and Development C) International Federation of Accountants D) All of the above Answer: D Difficulty: 1 Easy Topic: Global Accounting Standards Learning Objective: 01 - 01 Discuss the nature and sc ope of international accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Determination of net present value involves: A) forecasting future profits and cash flows. B) discounting future cash flows back to thei r present value. C) analysis on an after - tax basis. D) All of the above Answer: D Difficulty: 2 Medium Topic: Foreign Direct Investment Learning Objective: 01 - 01 Discuss the nature and scope of international accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) In which of the following levels can international accounting be defined? A) Supranational organizations B) Company C) Country D) All of the above Answer: D Difficulty: 1 Easy Topic: Global Ac counting Standards Learning Objective: 01 - 01 Discuss the nature and scope of international accounting. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 2 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 4) Which of the following functional areas is included in the st udy of international accounting? A) Financial accounting B) Managerial C) Taxation D) All of the above Answer: D Difficulty: 1 Easy Topic: Global Accounting Standards Learning Objective: 01 - 01 Discuss the nature and scope of international accounting. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 5) The factor used to convert from one country's currency to another country's currency is called the: A) interest rate. B) cost of capital. C) exchange rate. D) strike p rice. Answer: C Difficulty: 1 Easy Topic: Financial Reporting for Foreign Operations Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Understand AA CSB: Reflective Thinking Accessibility: Keyboard Navigation 6) What is the term used to describe the possibility that a foreign currency will decrease in U.S. dollar value over the life of an asset such as Accounts Receivable? A) Foreign exchange transl ation B) Foreign exchange risk C) Hedging D) Foreign currency options Answer: B Difficulty: 2 Medium Topic: Sales to Customers Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 3 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 7) Foreign exchange risk arises when: A) business transactions are denominated in foreign currencies. B) sales are made to customers in a domestic country. C) goods or services purchased from suppliers in a foreign country are denominated in domestic currency. D) auditing reports are prepared in a foreign currency. Answer: A Difficulty: 2 Medium Topic: Sales to Customers Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 8) In international accounting, a "hedge" is: A) a business transaction made to reduce the exposure of foreign exchange risk. B) the legal barriers in various divisions of a multinational company. C) the loss in US dollar resulting from a decline in the value of the US dollar relative to foreign currenc ies. D) a form of foreign direct investment. Answer: A Difficulty: 2 Medium Topic: Sales to Customers Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 4 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 9) Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called: A) transfer pricing. B) hedging. C) trans lating. D) cross - listing. Answer: B Difficulty: 1 Easy Topic: Hedges of Foreign Exchange Risk Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Unde rstand AACSB: Knowledge Application Accessibility: Keyboard Navigation 10) What term is used to describe the process of reducing foreign exchange risk? A) International accounting B) Exposure C) Hedging D) Globalization Answer: C Difficulty: 1 Easy T opic: Hedges of Foreign Exchange Risk Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 11) What is the advantage of foreign direct investment? A) Helps in retaining advantage over competition B) Reduces transportation costs C) Creates a company tailored to a foreign market's unique characteristics D) All of the above Answer: D Difficulty: 1 Easy Topic: Foreign Direct Investment Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Understand AACSB: Knowledge Application Accessibility: Key board Navigation 5 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 12) How should we recognize the difference in the value of a receivable in a foreign currency at the time it was recorded and the time the cash was received? A) As an adjustment to stockholders' equity B) As an adjustment to purchases C) As an extraordinary capital expenditure D) As a prior period adjustment Answer: A Difficulty: 3 Hard Topic: Sales to Customers Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and exp ort transactions). Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 13) What currency is used in the United Kingdom? A) Crown B) Euro C) British pound D) UK dollar Answer: C Difficulty: 1 Easy Topic: Sales to Customers Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 14) Which of the se European countries does NOT use the Euro as its domestic currency? A) France B) United Kingdom C) Ireland D) The Netherlands Answer: B Difficulty: 2 Medium Topic: Sales to Customers Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 6 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 15) Which of the following terms is used to describe the combining of the financial statements of all subsidiaries, both foreign and domestic, into the financial statements of the parent? A) Convergence B) Hedging C) Consolidation D) Incorporation Answer: C Difficulty: 1 Easy Topic: Financial Reporting for Foreign Operations Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) Which of the following statemen ts is true about U.S. taxation of foreign subsidiaries? A) The U.S. income taxes income generated by subsidiaries incorporated in foreign countries. B) U.S. multinationals do not pay tax on their worldwide income if incorporated in the U.S. C) Transfer pri cing will eliminate taxes by the U.S. government on multinational corporations. D) U.S. tax on foreign operations does not have to be paid until the income is brought back to the U.S. Answer: D Difficulty: 1 Easy Topic: International Income Taxation Le arning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Analyze AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 17) Why is auditing a multinational corporation potentially more difficult than auditing an entity that has only domestic operations? A) Language differences B) Cultural differences C) Multiple sets of accounting standards D) All of the above Answer: D Difficulty: 1 Easy Top ic: International Auditing Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions).; 01 - 05 Explain the notion of global accounting standards.; 01 - 06 Examine the importa nce of international trade; foreign direct investment; and multinational corporations in the global economy. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) What is the entry point for most companies into the world of i nternational business? A) Transfer pricing B) Exporting C) Foreign direct investment D) Cross - listing on international stock exchanges Answer: B Difficulty: 1 Easy Topic: Global Economy Learning Objective: 01 - 02 Describe accounting issues confronted b y companies involved in international trade (import and export transactions). Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 19) 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 the 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 t ranslation adjustment. D) restate the income using international accounting standards. Answer: A Difficulty: 2 Medium Topic: Financial Reporting of Foreign Operations Learning Objective: 01 - 02 Describe accounting issues confronted by companies involve d in international trade (import and export transactions). Bloom's: Analyze AACSB: Knowledge Application Accessibility: Keyboard Navigation 20) When setting transfer prices among international subsidiaries, the corporation must: A) make sure that the t otal tax is minimized. B) ensure that the transfer prices are acceptable to the taxing authorities in the countries involved. C) do whatever it takes to make taxes paid in the United States as low as possible. D) follow the transfer pricing policy used for domestic transfers. Answer: B Difficulty: 2 Medium Topic: International Transfer Pricing Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Analyze AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 21) What is the primary provision of the Foreign Corrupt Practices Act? A) To specify which corrupt practices are acceptable under U.S. law B) To specify how to account for bribes paid by U.S. corporations to obtain business from foreign governments C) To inform internal auditors how to detect fraud in multinational corporations D) To prohibit U.S. companies from paying bribes to foreign government officials to obtain business Answer: D Difficulty: 2 Medium Topic: International Auditing Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 22) What is a key objective of a company's performance evaluation system? A) To determine how much to pay executives in bonuses and other compensation B) To ensure that the domestic and foreign operations are achieving their objectiv es C) To control foreign subsidiaries D) To assess the effect of foreign exchange rates on published financial statements Answer: B Difficulty: 1 Easy Topic: Performance Evaluation of Foreign Operations Learning Objective: 01 - 02 Describe accounting is sues confronted by companies involved in international trade (import and export transactions). Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 10 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 23) What is the primary role of internal auditing in a multinational corporation? A) To assist the external auditors in completing the financial statement audit in a timely fashion B) To make sure that employees comply with local customs and traditions C) To ensure that corporate policies and procedures are being followed a nd to assess operating efficiency D) To prepare the consolidated financial statement of the corporation in compliance with international accounting standards Answer: C Difficulty: 2 Medium Topic: International Auditing Learning Objective: 01 - 02 Descri be accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Belmonte Corporation, with a division located in German y, must translate its financial statements from euros to U.S. dollars. What is the major accounting issue involved in translation? A) Most accountants are not conversant in foreign currency exchange. B) U.S. GAAP may differ from German GAAP. C) The U.S. do llar has been steadily falling relative to the euro. D) The resulting balance sheet may not balance. Answer: D Difficulty: 1 Easy Topic: Financial Reporting of Foreign Operations Learning Objective: 01 - 02 Describe accounting issues confronted by companies involved in international trade (import and export transactions). Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 11 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 25) The ownership and control of foreign assets, such as a manufacturing plant, is called: A) a hedge. B) foreign direct investment. C) an option. D) derivatives. Answer: B Difficulty: 1 Easy Topic: Foreign Direct Investment Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investm ent. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 26) What is a "greenfield" investment? A) Farm land held for speculation B) Foreign direct investment whereby a new facility is constructed abroad C) Purchasing an e xisting facility as a foreign direct investment D) A foreign investment that has been approved by the Environmental Protection Agency Answer: B Difficulty: 1 Easy Topic: Foreign Direct Investment Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 27) Which of the following is an example of a "greenfield" investment? A) Nike contracts with a footwear company in China to make athletic shoes. B) A Chinese oil company buys a U.S. oil company. C) Toyota, a Japanese automaker, builds an assembly plant in Ohio. D) Daimler, a German automaker, merges with Chrysler, a U.S. automaker. Answer: C Difficulty: 2 Medium Topic: Foreign Direct Investment Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 28) Whic h of the following is a reason for foreign direct investment? A) To reduce costs of doing business B) To protect domestic markets C) To protect foreign markets D) All of the above Answer: D Difficulty: 1 Easy Topic: Foreign Direct Investment Learning O bjective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 29) 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) purchasing goods from a domestic company. D) hedging foreign currency. Answer: B Difficulty: 2 Mediu m Topic: Financial Reporting of Foreign Operations Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3 0) 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 prices established to record an intercompany sale D) The taxes paid on sales in a foreign country Answer: C Difficulty: 1 Easy Topic: International Transfer Pricing Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Remember AACSB: Knowledge Application Accessibility : Keyboard Navigation 13 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 31) ABCO Corporation has its two wholly owned subsidiaries, Delta and Parry, in Country A and Country B, respectively. Parry purchases a part for its production from Delta. Country B has a higher tax rate than Country A. To minimize the corporation's overall income tax, how should ABCO set its transfer prices between its subsidiaries? A) Delta should sell parts to Parry at low prices. B) Delta should sell parts to Parry at high prices. C) It doesn't matter what transfer price is used because the subsidiaries are part of the same company. D) Transfer pricing does not affect the total tax paid by the corporation. Answer: B Difficulty: 1 Easy Topic: International Transfer Pricing Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Evaluate AACSB: Analytical Thinking Accessibility: Keyboard Navigation 32) Which of the following is a reason for the tremendous increase in the flow of foreign direct investment from 1990 to 2011? A) The relaxation of transfer pricing regulations B) The liberalization of investment laws in many countries C) The similarities in tax rates and tax laws across the globe D) The universal application of U.S. GAAP accounting standards Answer: B Difficulty: 1 Easy Topic: Foreign Direct Investment Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Evaluate AACSB: Reflective Thinking Accessibili ty: Keyboard Navigation 14 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 33) What is KPMG? A) It is a Dutch manufacturing company with plants in over 50 countries worldwide. B) It is an international public accounting firm. C) It is the largest of the multinational corporations listed on the NYSE. D) It is a governmental agency whose aim is promoting international business. Answer: B Difficulty: 1 Easy Topic: International Auditing Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct inves tment.; 01 - 04 Describe the practice of cross - listing on foreign stock exchanges. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 34) When a foreign subsidiary pays dividends to its U.S. parent, this process is known as : A) repatriation. B) the reverse authoritative principle. C) income - splitting. D) asset management. Answer: A Difficulty: 3 Hard Topic: Foreign Direct Investment Learning Objective: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 15 Copyright 2020 © McGra w - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 35) Many countries have recently liberalized their investment laws. What is the primary reason for these actions? A) To make it more difficult for multinational companies to compete with domestic corporations B) To encourage foreign direct investment C) To enable funds to flow out of their country more easily D) To make taxing foreign companies easier Answer: B Difficulty: 2 Medium T opic: Foreign Direct Investment Learning Objective: 01 - 06 Examine the importance of international trade; foreign direct investment; and multinational corporations in the global economy.; 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Which of the following statements is true about international transfer pricing? A) It is a violation of the Foreign Corrupt Practice s Act. B) It is accomplished using guidelines set up by the FASB. C) It can be used to minimize the amount of worldwide taxes. D) It cannot be regulated by countries. Answer: C Difficulty: 2 Medium Topic: International Transfer Pricing Learning Objecti ve: 01 - 03 Explain the reasons for; and the accounting issues associated with; foreign direct investment. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 37) The practice of having the stock listed and traded on several foreign stock exchanges is known as: A) SEC registration. B) initial public offering. C) consolidation. D) cross - listing. Answer: D Difficulty: 1 Easy Topic: Cross - listing on Foreign Stock Exchanges Learning Objective: 01 - 04 Describe the practice of cross - listing on foreign stock exchanges. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation