In the Process of Consolidating the Translated Financial Accounts of a Foreign

question 12

Multiple Choice

In the process of consolidating the translated financial accounts of a foreign operation,the elimination entry to record goodwill will be affected by the translation process in what way?

• A) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will vary each year depending on the exchange rates at the end of the period that are used to calculate the foreign exchange gain or loss.
• B) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be the same unless inter-company transactions have to be eliminated, in which case the entry will have to be adjusted for the exchange rate differences on the inter-company transactions.
• C) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be the same each year the elimination entry is made.
• D) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be affected by any subsequent transfers between equity items that may arise as a result of bonus issues or transfers between reserves.
• E) None of the given answers.

Comprehend the concept of opportunity cost and its calculation.

Identify the principle of comparative advantage and its importance in specialization and trade.

Recognize different types of capital and their roles in the economy.

Understand the outputs in the production process and their value to households.

---

Definitions:

Domestic Demand Curves

Graphs showing the quantity of a good that consumers in a domestic market are willing and able to purchase at various prices.

Import Demand Curves

Charts representing the volumes of a product that an economy is ready to import at various price points.

Export Supply Curves

A graphical representation showing the relationship between the quantity of a good that producers are willing to export and the price of the good in the international market.

Equilibrium World Price

The price at which the quantity of a good supplied globally equals the quantity demanded, in international trade.