1. Which of the following statements is true about U.S. taxation of foreign subsidiaries?
A)The U.S. does not tax income generated on subsidiaries incorporated in foreign countries.
B)U.S. multinationals pay tax on their worldwide income as soon as it is earned.
C)Transfer pricing will eliminate taxes by the U.S. government on multinational corporations.
D)U.S. tax on foreign operations does not have to be paid until the income is brought back to the United States.
2. According to IAS 37, how should contingent assets be recognized?
A)They should be disclosed in the notes to the financial statements if the inflow of resources is probable.
B)They should be recognized like any other asset, with a debit to “contingent assets.”
C)They should not be disclosed anywhere in the financial statements due to their uncertainty.
D)They should only be disclosed in the notes to the financial statements if the inflows of resources are virtually certain.
3. What would be a logical first step that should be taken to restate foreign financial statements to conform to U.S. GAAP, assuming a four-column worksheet will be used to post debit and credit adjustments and reclassifications to arrive at U.S. GAAP statements?
A)Convert the foreign currency amounts to U.S. dollars.
B)Restate historical costs to current cost basis.
C)Re-order foreign financial statements to U.S. format.
D)Determine the amount of foreign exchange gains or losses.
4. When accounting rules are left up to professional associations rather than being legislated by governmental bodies, what is the likely result?
A)Very general accounting rules are created, as in code law countries.
B)Very detailed rules for practice are created, as in common law countries.
C)Very general accounting rules are created, as in common law countries.
D)Very detailed rules for practice are created, as in code law countries.
5. Which of the following is a non-financial measure of performance?
A)return on investment
C)earnings per share
D)return on equity
6. What is a foreign currency transaction?
A)It is another name for an international transaction.
B)It is a transaction that involves payment at a date sometime in the future.
C)It is a business deal denominated in a currency other than a company's domestic currency.
D)It is an economic event measured in a currency other than U.S. dollars.
7. What is foreign exchange risk exposure?
A)the possibility of a loss because of changes in the value of a foreign currency
B)losses caused by paying for purchased goods in a foreign currency
C)losses caused by receiving payment in a foreign currency for goods sold
D)All of the above
8. Which of the following is generally true about the differences between U.S. GAAP and IASB standards?
A)U.S. GAAP is generally more flexible than IASB standards.
B)U.S. GAAP tends to be more rule-based and the IASB standards tend to be principles-based.
C)More professional judgment is required to apply U.S. GAAP than is required for implementing IASB standards.
D)In all cases, U.S. GAAP is more detailed than the IASB standards.
9. A representative market basket of products cost $250 at the beginning of the year, and the same collection of products costs $280 at the end of the year. What is the annual rate of inflation?
10. Under U.S. tax law, what happens to excess foreign tax credit?
A)It reduces taxes on ordinary income in the current year.
B)It can be carried back one year to calculate a refund on additional taxes paid to the U.S. on foreign source income.
C)It is lost unless the average foreign tax rate paid by the company in the future is greater than the U.S. tax rate.
D)none of the above
11. Under FASB’s new lease accounting standard, lessees will recognize most leases on what
A) Income Statement
B) Balance Sheet
C) Statement of Cash Flows
D) None of the above
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