Which of the Following Statements Is Correct

question 27

Multiple Choice

Which of the following statements is correct?

• A) If the functional currency of the foreign operation is different than the parent's functional currency, the monetary items must be translated using closing rates.
• B) If the functional currency of the foreign operation is different than the parent's functional currency, the monetary items must be translated using average rates.
• C) If the functional currency of the foreign operation is different than the parent's functional currency, the shareholders' equity must be translated using closing rates.
• D) If the functional currency of the foreign operation is the same as the parent's functional currency, the non-monetary items recorded at cost must be translated using average rates.

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Definitions:

Maximum Employment

A situation in which all available labor resources are being used in the most economically efficient way, one of the goals of economic policy.

Quantity Theory of Money

This economic theory posits that the general price level of goods and services is directly proportional to the amount of money in circulation.

Velocity of Money

The rate at which money circulates in the economy, typically measured as the ratio of GDP to the money supply.

Money in Circulation

The total amount of money, including cash and coins, that is in active use and circulating within an economy.