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

question 22

Multiple Choice

In the process of consolidating the translated financial statements 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.

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Definitions:

Consumer

An individual who purchases goods or services for personal use rather than for manufacturing or resale.

Lost Check

A check that has been misplaced, destroyed, or otherwise lost, potentially leading to the issuance of a stop payment order and requiring a replacement.

Drawer

In banking and finance, the person who writes or issues a check or draft instructing the bank to pay a specified amount of money to a designated party.

Drawee

The party in a financial transaction who is directed to pay a certain sum of money as per the payer's instructions.