The Underlying Principle of the Current/noncurrent Method Is

question 11

Multiple Choice

The underlying principle of the current/noncurrent method is

• A)assets and liabilities should be translated based on their maturity.
• B)monetary accounts have a similarity because their value represents a sum of money whose currency equivalent after translation changes each time the exchange rate changes.
• C)monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates.
• D)all balance sheet accounts are translated at the current exchange rate,except for stockholders' equity.A "plug" equity account,named cumulative translation adjustment (CTA),is used to make the balance sheet balance,since translation gains or losses do not go through the income statement according to this method.

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Definitions:

CVP Analysis

Cost-Volume-Profit Analysis; a management accounting tool that helps understand the relationship between costs, volume, and profit.

Inventory

Inventory consists of goods and materials held by a business for the purpose of resale or as part of the production process.

Contribution Margin

The selling price per unit minus the variable cost per unit, used to cover fixed costs and contribute to net profit.

Selling Price

The price for which a product or service is sold to the customer.