Question

QUESTION 1

1. The main issue in accounting for foreign currency transactions is:

   		how to distinguish between denomination currency or settlement currency.
   		how to translate the financial statements of a foreign operation.
   		how to treat any foreign exchange differences that arise when assets or liabilities are remeasured at the end of the reporting period using the closing rate.
   		how to record transactions with foreign operations.

0.1 points   

QUESTION 2

1. For a company that has an Australian A$ as its functional currency, which of the following is not a foreign currency transaction?

   		goods sold at prices denominated in UK pounds.
   		inventory sold to a customer in Hong Kong who pays in A$.
   		borrowing funds where amounts are payable in NZ$.
   		equipment sold at prices denominated in Japanese Yen.

0.1 points   

QUESTION 3

1. In determining an entity's functional currency, factors to be considered include which of the following?

   		The currency in which receipts from operating activities are usually retained.
   		The currency that mainly influences sales prices for goods and services.
   		The currency of the country whose competitive forces and regulations mainly determine the sales price of its goods and services.
   		All of the above.

0.1 points   

QUESTION 4

1. Which exchange rate is used at the end of the reporting period?

   		The closing rate.
   		The indirect rate.
   		The spot rate.
   		The ending rate.

0.1 points   

QUESTION 5

1. A realised exchange difference arises:

   		on remeasurement of a monetary liability at the end of the reporting period.
   		when the exchange rate changes between initial recognition and cash settlement.
   		on initial recognition of a monetary asset.
   		when the exchange rate changes between initial recognition and end of reporting period.

0.1 points   

QUESTION 6

1. At the date of the transaction, a foreign currency monetary item is initially recognised and measured using:

   		The closing rate.
   		US dollars.
   		The foreign currency monetary value.
   		Spot exchange rate.

0.1 points   

QUESTION 7

1. All of the following assets can be defined as ‘qualifying assets’ except:

   		manufacturing plants.
   		power generation facilities.
   		investment properties.
   		inventories purchased ready for sale.

0.1 points   

QUESTION 8

1. Which of the following statements is incorrect?

   		Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.
   		Financial assets and inventories that are manufactured or otherwise produced over a short period of time, and assets that are ready for their intended use or sale when acquired, are qualifying assets.
   		Financial assets and inventories that are manufactured or otherwise produced over a short period of time, and assets that are ready for their intended use or sale when acquired, are not qualifying assets.
   		A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

0.1 points   

QUESTION 9

1. If an Australian (A$) company enters a forward exchange contract to buy US$20,000, then which of the following applies?

   		The company’s contractual obligation (at the forward rate) and contractual right (at the spot rate) are settled on a net basis.
   		The company has a contractual right to receive US$20,000 at the settlement date and that right is an asset fixed in A$ at the forward rate.
   		The company has a contractual obligation to deliver foreign currency at the settlement date and that obligation is realised at the spot rate.
   		The company’s forward contract will act as a hedge against a recognised asset.

0.1 points   

QUESTION 10

1. AASB121/ IAS 21 The Effects of Changes in Foreign Exchange Rates requires that the financial report disclose which of the following?

   		The net exchange differences recognised in OCI and accumulated in a separate component of equity.
   		The amount of exchange differences recognised in the profit or loss for the period other than those that relate to financial instruments measured at fair value through profit or loss.
   		Any change in functional currency and reason for change.
   		All of the above.

Answer 1

1. question 1. The main issue in accounting for foreign currency transactions is: OPTION how to treat any foreign exchange differences that arise when assets or liabilities are remeasured at the end of the reporting period using the closing rate.

2. Question 2. For a company that has an Australian A$ as its functional currency, which of the following is not a foreign currency transaction? Option : inventory sold to a customer in Hong Kong who pays in A$

3. Question 3. In determining an entity's functional currency, factors to be considered include which of the following? Option: All of the above.

4. Question 4. Which exchange rate is used at the end of the reporting period Option: The ending rate

5. question 5. A realised exchange difference arises Option: on remeasurement of a monetary liability at the end of the reporting period.

6. Question 6. At the date of the transaction, a foreign currency monetary item is initially recognised and measured using: Option. The Spot exchange rate

7. Question 7. All of the following assets can be defined as ‘qualifying assets’ except: Option inventories purchased ready for sale

8. Question 8. Which of the following statements is incorrect? Option Financial assets and inventories that are manufactured or otherwise produced over a short period of time, and assets that are ready for their intended use or sale when acquired, are qualifying assets.

9. Question 9.If an Australian (A$) company enters a forward exchange contract to buy US$20,000, then which of the following applies? Option The company has a contractual right to receive US$20,000 at the settlement date and that right is an asset fixed in A$ at the forward rate.

10. Question 10. AASB121/ IAS 21 The Effects of Changes in Foreign Exchange Rates requires that the financial report disclose which of the following? Option All of the above.