When a Foreign Entity Has the Foreign Currency as Its

question 54

Multiple Choice

When a foreign entity has the foreign currency as its functional currency,it uses which exchange rate to translate revenues and expenses in the income statement?

• A) the average exchange rate during the period
• B) the end of the period exchange rate
• C) the historical exchange rate
• D) the exchange rate on the date the asset or liability was obtained

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Definitions:

Factory Overhead

Manufacturing costs that are not raw material or direct labor costs.

Raw Materials

The basic materials from which products are manufactured or made.

Corporate Headquarters

The main office or center of operations for a corporation, where key managerial and administrative activities are conducted.

LIFO Inventory Method

Last In, First Out, an inventory valuation method where the goods purchased last are the first to be sold.