Transaction Gains and Losses That Result from Adjusting Assets and Liabilities

question 21

Multiple Choice

Transaction gains and losses that result from adjusting assets and liabilities denominated in a currency other than the functional currency must appear on the foreign unit's income statement unless the gains or losses are attributable to

• A)foreign currency transactions that are designated as an economic hedge of a net investment in a foreign entity
• B)intercompany foreign-currency transactions that are of a short- term nature
• C)foreign-currency transactions that involve currency speculation
• D)the prospect of government intervention using currency controls

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Definitions:

Days' Sales in Inventory

A financial metric that measures the average number of days it takes for a company to sell its entire inventory during a given period.

Consignee

The individual or entity to whom goods are shipped to be sold on behalf of the owner, retaining no legal ownership until sales occur.

Expense Recognition Principle

An accounting principle that dictates that expenses should be recognized in the period in which they are incurred to generate revenues, matching expenses against revenues in the period in which the revenue was earned.

Specific Identification

A method of inventory valuation that identifies and assigns cost to individual inventory items, suitable for unique or expensive products.