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Test Bank for International Accounting, 6th Edition by Timothy Doupnik A+
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Created by: A SolutionTest Bank for International Accounting, 6th Edition
by Timothy Doupnik A+
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 these answers are correct.
2) Determination of net present value involves:
A) forecasting future profits and cash flows.
B) discounting future cash flows back to their present value.
C) analysis on an after-tax basis.
D) All of these answers are correct.
3) In which of the following levels can international accounting be defined?
A) Supranational organizations
B) Company
C) Country
D) All of these answers are correct.
4) Which of the following functional areas is included in the study of international
accounting?
A) Financial accounting
B) Managerial
C) Taxation
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D) All of these answers are correct.
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 price.
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 translation
B) Foreign exchange risk
C) Hedging
D) Foreign currency options
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.
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 currencies.
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D) a form of foreign direct investment.
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) translating.
D) cross-listing.
10) What term is used to describe the process of reducing foreign exchange risk?
A) International accounting
B) Exposure
C) Hedging
D) Globalization
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 these answers are correct.
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
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13) What currency is used in the United Kingdom?
A) Crown
B) Euro
C) British pound
D) UK dollar
14) Which of these European countries does NOT use the Euro as its domestic currency?
A) France
B) United Kingdom
C) Ireland
D) The Netherlands
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
16) 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 these answers are correct.
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