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SPE, Inter-Corporate Receivables, Inventory, and Exchange Rates

1. A special-purpose entity (SPE), in general, is defined as:
a. Taking the form of a corporation, trust or partnership
b. A financing vehicle that is not a substantive operating entity
c. An entity usually created for a single specified purpose
d. All of the above
e. None of the above

2. DEF reports Inventory of $100,000 on its balance sheet at the end of the year, and UVW reports Inventory of $70,000. What is the amount of Inventory to be reported on the consolidated balance sheet for DEF Company and Subsidiary as of the end of the year?
a. $170,000
b. $100,000
c. $168,500
d. $70,000
e. None of the above

3. If inter-corporate receivables and payables are not eliminated when a consolidated balance sheet is prepared, both consolidated assets and liabilities are:
a. Overstated by an equal amount
b. Understated by an equal amount
c. Correctly stated
d. Overstated by an unequal amount
e. None of the above

4. Under FASB Statement No. 130, "Reporting Comprehensive Income," which of the following is not a major element of other comprehensive income?
a. Unrealized gains and losses on investments in certain securities
b. Certain minimum pension liability adjustments
c. Revenues from continuing operations
d. Foreign currency translation adjustments
e. None of the above

5. When a subsidiary makes a sale to its parent company, the sale is referred to as:
a. A downstream sale
b. An upstream sale
c. An external sale
d. All of the above
e. None of the above

6. Eliminations of inter-company inventory transactions ensure that which of the following costs is included in the consolidated balance sheet when the inventory is still on hand:
a. Replacement cost to the seller
b. Replacement cost to the consolidated entity
c. Historical cost to the consolidated entity
d. Historical cost to the seller
e. None of the above

7. The official pronouncement which governs accounting for foreign currency-denominated transactions that require payment or receipt of foreign currency is which of the following?
a. FASB Statement No. 52
b. FASB Statement No. 133
c. FASB Statement No. 138
d. FASB Statement No. 149
e. None of the above

The U.S. dollar equivalent of 1 FCU (the "widget," symbol () has the following values on the dates indicated:
January 1 July 1 December 31
Value of U.S. dollar equivalent of 1 widget $ 1.300 $ 1.115 $ 1.200

8. The indirect exchange rate (IER) on July 1 is:
a. 0.7692
b. 0.8969
c. 0.8333
d. 1.0000
e. None of the above

9. Assume that a U.S. manufacturer exports a U.S.-made automobile to a foreign consumer for $15,000. The consumer will pay in widgets and the sale is made on July 1. How much more will the sale cost the foreign consumer on July 1 than it would have at the same sales price on January 1?
a. 2,775
b. -0-
c. 1,916
d. 954
e. None of the above

10. Now assume that the foreign consumer holds off buying the automobile until December 31, but the U.S. manufacturer's price has risen to $15,500 at that date. How much will the foreign consumer save over what he would have paid had he purchased the automobile on July 1?
a. 538
b. 954
c. 1,914
d. -0-
e. None of the Above

Solution Summary

Various financial concepts are discussed.