EXAMINATION

Code: 1

Tracking number: Office use code

(for student) ……… ………..

Program: IB + AC Lecturer’s Signature

Course Code: INS3017
Course Title: International Accounting
Level: Date: ………………………………

Time allowed: 90 minutes Department’s Signature

Date:
Time:
Date: ………………………………

Instructions to students:
- Closed book examination.
- Others instructions:

1.Student name:

(written in English and in Vietnamese)

2.Date of birth:

3.Student ID No:

4.Class:

5.Invigilator’s signature:

This exam paper contains 8 pages, including the cover page.

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 Office use code
………….

Total mark (written in numbers):

Total mark (written in words):

Marker’s signature:

PART 1. MULTIPLE CHOICE QUESTIONS (4 points)

(0.2 points for each question)
1. Which of the following is NOT among the four methods which have been used to translate
foreign currency financial statements globally?

A. The historic/non-historic method

B. The monetary/nonmonetary method
C. The temporal method
D. The current exchange rate

2. What exchange rate should be used to translate the common stock of Essco Ltd, a foreign
subsidiary of Peako Corp., when consolidating the financial statements using the current rate
method?
A. Current rate
B. Historical rate
C. Average rate
D. Cannot be determined with the information given

3. Which of the following methods uses the current exchange rate to consolidate all accounts
of a foreign subsidiary into the financial statements of its parent?
A. Current rate method
B. Temporal method
C. Current/noncurrent method
D. None of the above

4. Poole Corporation is a U.S. company with a branch in China. Income earned by the
Chinese branch is taxed at the Chinese corporate income tax rate of 25 percent and at the rate
of 35 percent in the United States. What is this an example of?
A. Capital-export neutrality.
B. Double taxation.
C. A tax treaty.
D. Taxation on the basis of consumption.

5. There are two primary taxes imposed on profits earned by corporations in international
trade. One is the corporate income tax. What is the other type of tax on earnings of
multinational corporations?
A. Excise tax
B. Payroll tax
C. Withholding tax
D. Value-added tax
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6. Which of the following is not a method commonly used for establishing transfer prices?
A. Cost-based transfer price.
B. Negotiated price.
C. Market-based transfer price.
D. Industrywide transfer price.

7. What is the term used for intercompany transactions from a parent to a subsidiary?
A. Upstream transfer
B. Downstream transfer
C. International transfer
D. None of the above

8. The monetary amount used to record intercompany transactions is called:

A. exchange rate
B. Transfer price
C. Conversion rate
D. Incremental cost

9. When a transfer price is set by the management of a parent company rather than by the
subsidiary managers, what kind of transfer price is being used?
A. Market-based transfer price
B. Negotiated transfer price
C. Discretionary transfer price
D. Cost-based transfer price

10. What is a “foreign exchange rate?”

A. The price to buy a foreign currency
B. The price to buy foreign goods
C. The difference between the price of goods in a foreign currency and the price in a
domestic currency.
D. The cost to hold all monetary assets in a single currency

11. Which of the following is a reason for foreign direct investment?

A. Reduce costs of doing business
B. Protect domestic markets
C. Protect foreign markets
D. All of the above

12.Which of these European countries does use the Euro as its domestic currency?
A. France
B. United Kingdom
C. United Stated
D. Canada

13. What is the term used to describe the possibility that a foreign currency will decrease in
US $ 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

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14. Which of the following is not a criterion that must be met to recognize revenue from the
sale of goods?
A. The amount of revenue can be measured reliably.
B. The significant risks and rewards of ownership of the goods have been transferred
to the buyer.
C. The costs incurred or to be incurred with respect to the sale of the goods can be
measured reliably.
D. It is certain that the economic benefits associated with the sale will flow to the
seller.

15. Assume that Rex Company Inc. has the following inventory item on hand at December
31, Year 1: History cost: $1,100; Replacement Cost: $1,000; Estimated selling price: $1,200;
Estimated costs to complete and sell: $150. How much Inventory loss year 1 under IFRS:
A. $ 50
B. $ 150
C. $ 100
D. $ 0

16. On January 1, Year 1, an entity acquires a new machine with an estimated useful life of
20 years for $100,000. The machine has an electrical motor that must be replaced every four
years at an estimated cost of $20,000. Continued operation of the machine requires an
inspection every five years after purchase; the inspection cost is $10,000. The company uses
the straight-line method of depreciation. What is the depreciation expense for Year 1 under
IFRS?
A. $5,000.
B. $5,500.
C. $10,000.
D. $10,500.

17. 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.

18. Which of the following items is normally translated the same way under both
the current rate and temporal methods of translation?
A. Inventory
B. Equipment
C. Sales revenue
D. Depreciation expense

This information is used for question 19 & 20.

Jason Company has fixed assets information as below:
Jan 1, Year 1. Purchase £1,000 with rate $1.51 per £
Jan 1, Year 2. Purchase £4,000 with rate $1.49 per FC
Both equipment have a five-years useful life.
Average Exchange rate is $1.50 per £
Exchange rate at Dec 31, Year 2.is $1.51 per £.

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19. Assets value under temporal method in Dec 31, year 2 in PC ($)
A. $.7,470
B. $ 5,000
C. $ 7,500
D. $ 7,550

20. Depreciation Expense under current rate method year 2 in PC ($)

A. $. 1,494
B. $ 1,500
C. $ 1,000
D. $ 1,510

ANSWER:
1. 6. 11. 16.

2. 7. 12. 17.

3. 8. 13. 18.

4. 9. 14. 19.

5. 10. 15. 20.

PART 2. PROBLEM ANALYSIS (2 points)

December 1, 2016, Eximco Inc., a U.K company, makes a sale and ships goods to Rose Inc.,
a U.S. company.

 Sales price is 8,000 U.S. dollars

 Rose Inc. agrees to pay in U.S dollar by bank account on March 1, 2017.
 Spot rate as of December 1, 2016: 1GBP (£) = 1.28 USD ($)
 Spot rate as of December 31, 2016: 1£ = $ 1.29
 Spot rate as of March 1, 2017: 1£ = $1.30
 Eximco Inc. has a December 31 year end.
Required:
1. How Eximco Inc. records the sale on December 1, 2016?

2. How Eximco Inc. records the foreign exchange gain/loss on December 31, 2016 and on
March 1, 2017?

Note: Round percentages to three decimals place.

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PART 3. TRANSLATION OF FINANCIAL STATEMENTS (4 points)

Brookhurst Company (a U.S.-based company) established a subsidiary in Spain on January 1,
2010, by investing €800,000. The subsidiary’s opening balance sheet (in Euro) was as
follows:

Balance Sheet
January 1, 2010
€ €
Cash 200,000
Inventory 600,000 Capital Stock 800,000
Total Assets 800,000 Total Liabilities and Equity 800,000

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Relevant exchange rates for 2010 are as follows:
Jan 1. 2010 …………………………………………………………………………1.000
Average 2010 ………………………………………………………………………0.950
Rate when property and equipment were acquired and long-term debt was incurred. Jan
15. 2010…………………………………….............................................................0.980
Rate when capital was increased Feb 1. 2010 ……………………………………..0.970
Rate when dividends were declared. Dec 1. 2010 ………………………………....0.920
Average for the month of December………………………………………..……...0.910
December 31. 2010 …………………………………………………………...……0.900

The subsidiary’s financial statements for the year ended December 31. 2010 are as follows.
Required: Translate the Spain subsidiary’s financial statements into U.S. dollars using
Temporal Method.

Balance Sheet Dec 31, 2010

€ Translation Rate $
Assets

Cash 550,000

Account Receivable 600,000

Inventory* 800,000

Property and equipment 2,080,000

Accumulated Depreciation (200,000)

Total Assets 3,830,000

Liabilities and Equity

Account Payable 330,000

Long-term Debt 2,000,000

Total Liabilities 2,330,000

Capital Stock 1,000,000

Retained Earnings 500,000

Total Equity 1,500,000

Total Liabilities and Equity 3,830,000

* Inventory is carried at FIFO cost, ending inventory was acquired evenly throughout the
month of December

CODE 1-7
 Income Statement, 2010
2010 € Translation Rate $

Sales 8,000,000

Costs of goods sold 6,000,000

Selling and administrative
expenses 500,000

Depreciation expense 200,000

Interest expense 180,000

Income before taxes 1,120,000

Income tax 280,000

Remeasurement Gain 89,200

Net income 840,000

Statement of Retained Earnings, 2010

2010 € Translation Rate $

Retained Earnings, 1/1/2010 100,000

Calculation from
Net Income 840,000 Income Statement

Less: Dividends 12/1/2010 (440,000)

Retained Earnings,
31/12/2010 500,000

Calculation for COGs € Translation Rate $

Beginning Inventory 600,000

Plus: Purchases 6,200,000

Less: Ending Inventory (800,000)

Cost of Goods Solds 6,000,000

Calculation for Capital Stock € Translation Rate $

Beginning 800,000 1.00 800,000

Added 200,000 0.97 194,000

Ending 1,000,000 994,000

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