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

question 19

Multiple Choice

In the process of consolidating the translated financial accounts of a foreign operation,what will be the form of the journal entry required to eliminate the foreign currency effect of a purchase of inventory by the subsidiary from the parent entity? Assume that the value of the foreign currency of the foreign operation has increased relative to the reporting currency.

• A)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Foreign currency loss } ( \mathrm { P \& L } ) & \mathrm { X } & \\
• \hline \mathrm { Cr } & \text { Cost of goods sold } & & \mathrm { X } \\
• \hline
• \end{array}\]
• B)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Inventory } & \mathrm { X } & \\
• \hline \mathrm { Cr } & \text { Foreign currency gain } ( \mathrm { P \& L } ) & & \mathrm { X } \\
• \hline
• \end{array}\]
• C)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Inventory } & \mathrm { X } & \\
• \hline \mathrm { Cr } & \text { Foreign currency translation reserve } & & \mathrm { X } \\
• \hline
• \end{array}\]
• D)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Foreign currency translation reserve } & \mathrm { X } & \\
• \hline \mathrm { Cr } & \text { Inventory } & & \mathrm { X } \\
• \hline
• \end{array}\]

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Definitions:

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A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.