A US company that has purchased inventory from a German supplier would be exposed to a net exchange gain on the unpaid balance if
a-The amount to be paid was denominated in dollars
b-The Dollar weakened in relation to the Euro and the Euro was the denominated currency
c-The Dollar strengthened relative to the Euro and the Euro was the denominated currency
d-The company signed a forward contract for the purchase of Euros
When the affiliated companies sell on credit the commercial balances, the accounts receivable and the intercompany payables:
a-Appear only in the books of the parent in the consolidated statements
b- They appear only in the books of the subsidiary in the consolidated statements
c-Appear in the books of both the parent company and the subsidiary in the consolidated statements
d-They do not appear in the consolidated statements
You are the controller of company P and you have been asked to review this situation to see if it is in the best interest of the company. Company P would like to sell bonds to obtain financing. Company P has an 80% interest in company S and interest rates are down. Company S is smaller than company P and has a lower credit rating. Company P wants to reduce interest costs on company debt S. You have decided
a-Intercompany debt is eliminated when the consolidated statements are prepared so it would be a good idea
bThe intercompany debt would not be eliminated when the consolidated statements are prepared, therefore, it shows a high current relation with the parent company.
c-The intercompany debt would not be eliminated when the consolidated statements were prepared, which would show a high current ratio with the subsidiary
d-A parent can not incur debt for a subsidiary
A sign of significant influence in the accounting of capital investments would be:
a-Shared management, employees or technology between the investment and the investor
b-Shared external auditor.
c-Greater percentage of ownership by third parties.
d-Great decrease in the market price per common share
A company has purchased, for 50,000 FCs, an electric generator from a foreign company. The exchange rates were 1 FC = $ 0.90 on the delivery date and 1 FC = $ 0.76 when the payment was paid. What is the final value registered if the two-transaction method is used?
a- $ 38,000
b- $ 40,000
c- $ 45,000
d- $ 50,000
A arm's length transaction, which would be reflected in the consolidated financial statements, would include:
a-A loan to the president of the subsidiary company
b-The purchase of material from a supplier abroad
c-The sale of fixed assets that are no longer needed to the subsidiary
d-Sales of inventory to a subsidiary
The equity method of investment accounting would apply in which situation:
a-When 20-50% of preferred shares are owned
b-When a threshold of 15-20% of the ownership of ordinary shares is reached.
c-When consolidation is impracticable.
d - When less than 20% of the ordinary shares are owned, if the investor can exercise a significant influence over the operations of the investees.
An economic advantage of a business combination includes
a-Use of duplicate assets
b-Create separate management teams
c-Coordinated marketing campaigns
d-Combination of levels horizontally within the marketing chain
Assuming that the functional currency of a foreign subsidiary is not the local currency, which of the following accounts would be re-evaluated at the historical rate?
b-Notes payable in the long term
Callie was admitted to the Adams & Beal Partnership four years ago. The association has a deficiency at the end of the year for the current year. How could this deficiency be accounted for?
a-Use the profit and loss ratios to absorb the deficiency
b-Do not account for the loss in the incurred year, this can be compensated with the income in future years
c-Do not account for the loss in the incurred year, this could be compensated with the income in future years or recovered to compensate the income in previous years
d-The losses are not transmitted to the individual partners of an association
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