A Foreign Entity Is a Subsidiary of a U

question 5

Multiple Choice

A foreign entity is a subsidiary of a U.S.parent company and has always used the current rate method to translate its foreign financial statements on behalf of its parent company.Which one of the following statements is false?

• A)The U.S.dollar is the functional currency of this company.
• B)Changes in exchange rates between the subsidiary's country and the parent's country are not expected to affect the foreign entity's cash flows.
• C)Translation adjustments are shown in stockholders' equity as increases or decreases in other comprehensive income.
• D)Translation adjustments are not shown on the income statement.

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Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, improving accuracy in product costing.

Overhead Cost

Expenses related to the day-to-day running of a business that are not directly linked to a specific product or service but are necessary for the business to operate.

Activity Rates

The specific costs associated with particular business activities, measured to allocate resources or assess performance.

Direct-Labor-Hours

The total hours worked by employees that are directly involved in the manufacturing process.