Under the Current Rate Method of Translating Foreign Currency Financial

question 28

Multiple Choice

Under the current rate method of translating foreign currency financial statements, what exchange rate should be used for cost of goods sold?

• A) Spot rate at the end of the year
• B) Average rate during the year
• C) Spot rate mid-year
• D) There is no single rate because beginning and ending inventory must be converted at different exchange rates than purchases.

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Definitions:

Utility-maximizing

The economic principle that individuals or firms seek to get the highest satisfaction or profit from their resources and choices.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a market.

Law of Diminishing

The principle that states that as one input variable is incrementally increased, there will be a point at which the added output per unit of input will start to decrease, holding all other inputs constant.

Price-elasticity

A measure of how much the quantity demanded or supplied of a good responds to a change in its price.