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Test Bank For International Accounting, 6th Edition By Timothy Doupnik (Full)
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Chapter 01 6e
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
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.
Test Bank for International Accounting, 6th Edition by Timothy Doupnik
Answers Included ✅
2
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.
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
3
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
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
4
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.
17) What is the entry point for most companies into the world of international business?
A) Transfer pricing
B) Exporting
C) Foreign direct investment
D) Cross-listing on international stock exchanges
18) 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 translation adjustment.
D) restate the income using international accounting standards.
19) When setting transfer prices among international subsidiaries, the corporation must:
A) make sure that the total 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.
20) 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
5
21) 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 objectives
C) To control foreign subsidiaries
D) To assess the effect of foreign exchange rates on published financial statements
22) 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 and to assess
operating efficiency
D) To prepare the consolidated financial statement of the corporation in compliance with
international accounting standards
23) Belmonte Corporation, with a division located in Germany, 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. dollar has been steadily falling relative to the euro.
D) The resulting balance sheet may not balance.
24) 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.
25) 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 existing facility as a foreign direct investment
D) A foreign investment that has been approved by the Environmental Protection
Agency
6
26) 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.
27) Which 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 these answers are correct.
28) 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.
29) 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
30) 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.
7
31) Which of the following is a reason for the tremendous increase in the flow of foreign direct
investment from 1990 to 2020?
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
32) 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.
33) 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.
34) 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
35) Which of the following statements is true about international transfer pricing?
A) It is a violation of the Foreign Corrupt Practices Act.
B) It is accomplished using guidelines set up by the FASB and IASB
C) It can be used to minimize the amount of worldwide taxes.
D) It cannot be regulated by countries.
8
36) 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.
37) Foreign companies that are listed on the New York Stock Exchange (NYSE) and following
their domestic GAAP must report their income in terms of:
A) the International Accounting Standards.
B) the GAAP of their home country.
C) the GAAP of the United States.
D) All of these answers are correct.
38) Which of the following is a reason a company might cross-list itself on a foreign stock
exchange?
A) It wants to hedge against currency fluctuations.
B) It is less expensive than listing itself solely on a domestic exchange.
C) It wants to obtain acquisition currency for acquiring a foreign company.
D) It is required for accomplishing foreign direct investment.
39) Why would a company want its stock cross-listed on the stock exchanges of several
countries?
A) To make financial reporting less burdensome for its accounting firm
B) In order to use International Financial Reporting Standards
C) To gain access to more financial resources than are available in its home country
D) All of these answers are correct.
40) What group is primarily responsible for the creation of International Financial Reporting
Standards (IFRS)?
A) Financial Accounting Standards Board (FASB)
B) International Forum on Accountancy Development (IFAD)
C) International Federation of Accountants (IFA)
D) International Accounting Standards Board (IASB)
9
41) Which of the following is an advantage of having a single set of accounting standards used
worldwide?
A) Reduced accounting costs for multinational corporations
B) Increased power of the FASB
C) Reduced number of multinational corporations on the NYSE
D) Increased diversity of accounting methods used by multinational corporations
42) Assume that ABCO is a U.S. multinational corporation. Its foreign subsidiaries must report
income in their respective countries according to GAAP in those countries. How must ABCO
report its consolidated financial statements?
A) ABCO must choose any one country's accounting standards and combine the
subsidiary reports into the parent company's statements using that one country's
GAAP.
B) Since the company is operating in several different countries, the International
Accounting Standards must be used for the consolidated financial statements.
C) Since ABCO is a U.S. corporation, U.S. generally accepted accounting principles, or
GAAP, must be used for the consolidated financial statements.
D) On the consolidated financial statements, each subsidiary's financial results must be
shown in the currency of the country where the subsidiary is located.
43) In 2020, the country with the largest amount of exports was:
A) the United States of America.
B) China.
C) Japan.
D) Germany.
44) Which of the following ratios is used in the calculation of the multinationality index (MNI)?
A) Foreign working capital to total working capital
B) Foreign cash to total cash
C) Foreign employment to total employment
D) Foreign loans to total loans
...
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Chapter 01 6e
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
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.
Test Bank for International Accounting, 6th Edition by Timothy Doupnik
Answers Included ✅
2
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.
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
3
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
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
4
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.
17) What is the entry point for most companies into the world of international business?
A) Transfer pricing
B) Exporting
C) Foreign direct investment
D) Cross-listing on international stock exchanges
18) 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 translation adjustment.
D) restate the income using international accounting standards.
19) When setting transfer prices among international subsidiaries, the corporation must:
A) make sure that the total 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.
20) 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
5
21) 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 objectives
C) To control foreign subsidiaries
D) To assess the effect of foreign exchange rates on published financial statements
22) 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 and to assess
operating efficiency
D) To prepare the consolidated financial statement of the corporation in compliance with
international accounting standards
23) Belmonte Corporation, with a division located in Germany, 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. dollar has been steadily falling relative to the euro.
D) The resulting balance sheet may not balance.
24) 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.
25) 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 existing facility as a foreign direct investment
D) A foreign investment that has been approved by the Environmental Protection
Agency
6
26) 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.
27) Which 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 these answers are correct.
28) 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.
29) 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
30) 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.
7
31) Which of the following is a reason for the tremendous increase in the flow of foreign direct
investment from 1990 to 2020?
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
32) 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.
33) 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.
34) 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
35) Which of the following statements is true about international transfer pricing?
A) It is a violation of the Foreign Corrupt Practices Act.
B) It is accomplished using guidelines set up by the FASB and IASB
C) It can be used to minimize the amount of worldwide taxes.
D) It cannot be regulated by countries.
8
36) 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.
37) Foreign companies that are listed on the New York Stock Exchange (NYSE) and following
their domestic GAAP must report their income in terms of:
A) the International Accounting Standards.
B) the GAAP of their home country.
C) the GAAP of the United States.
D) All of these answers are correct.
38) Which of the following is a reason a company might cross-list itself on a foreign stock
exchange?
A) It wants to hedge against currency fluctuations.
B) It is less expensive than listing itself solely on a domestic exchange.
C) It wants to obtain acquisition currency for acquiring a foreign company.
D) It is required for accomplishing foreign direct investment.
39) Why would a company want its stock cross-listed on the stock exchanges of several
countries?
A) To make financial reporting less burdensome for its accounting firm
B) In order to use International Financial Reporting Standards
C) To gain access to more financial resources than are available in its home country
D) All of these answers are correct.
40) What group is primarily responsible for the creation of International Financial Reporting
Standards (IFRS)?
A) Financial Accounting Standards Board (FASB)
B) International Forum on Accountancy Development (IFAD)
C) International Federation of Accountants (IFA)
D) International Accounting Standards Board (IASB)
9
41) Which of the following is an advantage of having a single set of accounting standards used
worldwide?
A) Reduced accounting costs for multinational corporations
B) Increased power of the FASB
C) Reduced number of multinational corporations on the NYSE
D) Increased diversity of accounting methods used by multinational corporations
42) Assume that ABCO is a U.S. multinational corporation. Its foreign subsidiaries must report
income in their respective countries according to GAAP in those countries. How must ABCO
report its consolidated financial statements?
A) ABCO must choose any one country's accounting standards and combine the
subsidiary reports into the parent company's statements using that one country's
GAAP.
B) Since the company is operating in several different countries, the International
Accounting Standards must be used for the consolidated financial statements.
C) Since ABCO is a U.S. corporation, U.S. generally accepted accounting principles, or
GAAP, must be used for the consolidated financial statements.
D) On the consolidated financial statements, each subsidiary's financial results must be
shown in the currency of the country where the subsidiary is located.
43) In 2020, the country with the largest amount of exports was:
A) the United States of America.
B) China.
C) Japan.
D) Germany.
44) Which of the following ratios is used in the calculation of the multinationality index (MNI)?
A) Foreign working capital to total working capital
B) Foreign cash to total cash
C) Foreign employment to total employment
D) Foreign loans to total loans
...
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