If the Exchange Rate at the End of the a Foreign

question 82

Multiple Choice

If the exchange rate at the end of the a foreign subsidiary's first year was 5 Fidgets to 1 Canadian dollar, and if it was 8 Fidgets to 1 Canadian dollar at the end of the second (current) year, what exchange rate should be used to convert total assets if we want to calculate the company's ROI in Canadian dollars?

• A)the rate in effect when the ROI is calculated
• B)the rate estimated to be in effect when the ROI is to be reported in the financial statements
• C)the average rate for the year, assuming that the rate changed approximately evenly throughout the year
• D)the rate in effect when the assets were acquired (ie.5 to 1)
• E)it would be double-counting to convert the assets - leave both assets and income in fidgets and the exchange rate for the numerator cancels out the exchange rate for the denominator

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Definitions:

Gomphosis

A type of fibrous joint where a peg-like structure fits into a socket, such as the connection between teeth and jawbone.

Flexing

The action of contracting a muscle or group of muscles to cause movement of a limb or other body part.

Hyperextending

The act of extending a limb or joint beyond its normal range of motion, which can lead to strain, injury, or damage of tissues.

Multiaxial Joint

A type of synovial joint that allows for movement along multiple planes and axes.