Test Bank For International Accounting 3rd Edition By Doupnik

Chapter 01: Introduction to International Accounting

Multiple Choice Questions

1. Which of the following groups is a supranational organization?
2. A) United Nations
3. B) Organization for Economic Cooperation and Development
4. C) International Federation of Accountants
5. D) All of the above

Answer: D   Level: Easy   LO: 1

2. Determination of net present value involves:
3. A) forecasting future profits and cash flows.
4. B) discounting future cash flows back to their present value.
5. C) analysis on an after-tax basis.
6. D) All of the above

Answer: D   Level: Medium   LO: 1

3. International accounting can be defined in terms of which the following levels?
4. A) Supranational organizations
5. B) Company
6. C) Country
7. D) All of the above

Answer: D   Level: Easy   LO: 1

4. The factor used to convert from one country’s currency to another country’s currency is called the:
5. A) Interest rate.
6. B) Cost of capital.
7. C) Exchange rate.
8. D) Strike price.

Answer: C   Level: Easy   LO: 2

5. 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?
6. A) foreign exchange translation
7. B) foreign exchange risk
8. C) hedging
9. D) foreign currency options

Answer: B   Level: Medium   LO: 2

6. Foreign exchange risk arises when:
7. A) business transactions are denominated in foreign currencies.
8. B) sales are made to customers in a foreign country.
9. C) goods or services are purchased from suppliers in a foreign country.
10. D) accounting reports are prepared in a foreign currency.

Answer: A   Level: Medium   LO: 2

7. As used in international accounting, a “hedge” is:
8. A) a business transaction made to reduce the exposure of foreign exchange risk.
9. B) the legal barrier between the various divisions of a multinational company.
10. C) the loss in US $ resulting from a decline in the value of the US $ relative to foreign currencies.
11. D) one form of foreign direct investment.

Answer: A   Level: Medium   LO: 2

8. Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called:
9. A) transfer pricing.
10. B)
11. C)
12. D) cross-listing.

Answer: B   Level: Easy   LO: 2

9. What term is used to describe the process of reducing foreign exchange risk?
10. A) international accounting
11. B) exposure
12. C) hedging
13. D) globalization

Answer: C   Level: Easy   LO: 2

10. The ownership and control of foreign assets such as a manufacturing plant is called:
11. A) a hedge.
12. B) foreign direct investment.
13. C)
14. D)

Answer: B   Level: Easy   LO: 3