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•一、SingleChoice•1.Whichofthefollowingtranslationmethodissingleratemethod?(B)•ATemporalmethod•B.Currentratemethod•C.Monetary/non-monetarymethod•D.Current/non-currentmethod••2.()viewsmonetaryassetsandliabilitiesexposedtothesameexchangeexposure.(B)•A.Currentratemethod•B.Monetary/non-monetarymethod•C.Current/non-currentmethod•D.Temporalmethod•••3.UnderSFASNO.52,theprimarycurrencyinwhichacompanyconductsitsbusinessiscalled•(B).•A.Corecurrency•B.Functionalcurrency•C.Hardcurrency•D.Convertiblecurrency••4.Aforwardcontractisanagreementto•(C).•A.Buyaforeigncurrencyinthefutureatavariablerate•B.Sellaforeigncurrencyinthefutureatasetrate•C.Buyorsellaforeigncurrencyinthefutureatasetrate•D.Noneoftheabove•5.Whichofthefollowingsisanon-monetaryitem?•(D)•A.Cash•B.Accountspayable•C.Notesreceivable•D.Equipment••6.UnderSFASNO.52,thetemporalmethodoftranslationisusedwhen(C).•A.Thelocalcurrencyisthefunctionalcurrency•B.Thelocalcurrencyisthereportingcurrency•C.Theparent’scurrencyisthefunctionalcurrency•D.Theparent’scurrencyisthereportingcurrency二、MultipleChoice•1.WhichtranslationmethodsputforeigntranslationgainsorlossesinIncomeStatement?•(BCD)•A.Currentratemethod•B.Monetary/non-monetarymethod•C.Current/non-currentmethod•D.Temporalmethod•E.Historicratemethod•2.Whichitemsinfollowsaremonetaryitems?•(BCE)•A.Inventory•B.AccountsReceivable•C.Long-termdebts•D.NetFixedAsset•E.Cash••3.Inforeigncurrencytranslationmethods,whichmethodstranslateBalancesheetatfirst?(BCD)•A.Currentratemethod•B.Monetary/non-monetarymethod•C.Current/non-currentmethod•D.Temporalmethod•E.Historicratemethod•4.Foreigncurrencytransactionincludes(ABCD)•A.spottransaction•B.forwardcontract•C.currencyoption•D.currencyswap•E.currencytranslation.•5.Therearethreetypesofforeignexchangeexposure,Theyare(ACD)•A.Translationexposure•B.Exchangerateexposure•C.Transactionexposure•D.Economicexposure•E.Foreigncurrencyexposure•6.Whichoffollowingforeignexchangeexposuresarenotincludedintransactionexposure?(CE)•A.Billingexposure•B.Quotationexposure•C.Translationexposure•D.Backlogexposure•E.Economicexposure•7.Whichofthefollowingsituationscanarisetransactionexposure?(ABCDE)•A.Borrowingfundsinaforeigncurrency.•B.Engagingincontractstobuyorsellforeigncurrencyatafuturedate.•C.Buyingoncreditgoodsorserviceswhosepricesarecontractuallydenominatedinforeigncurrencies.•D.Sellingoncreditgoodsorserviceswhosepricesarecontractuallydenominatedinforeigncurrencies.•E.Lendingfundsinaforeigncurrency.•三、TrueorFalse•1.Ifthespotrateislowerthantheforwardrateforaparticularcurrency,thenthatcurrencywouldbesellingatapremium.•(T)•2.Currencyoptionisacontractthatprovidestherightandtheobligationtotradeaforeigncurrencyatasetexchangerateonorbeforeagivendateinthefuture.•(F)•3.Bidrateisthepriceatwhichafinancialinstitutioniswillingtosellacurrency.•(F)•4.Indirectquoteisthepriceofoneunitoftheforeigncurrencypricedinthedomesticcurrency.•(F)•5.Directquoteisthepriceofoneunitoftheforeigncurrencypricedinthedomesticcurrency.(T)•6.InCurrentRateMethod,allitemsinBalanceSheetaretranslatedatthecurrentrate.•(F)•7.TemporalMethodonlychangesthemonetaryunitofmeasurementnottheattributeofmeasurement.•(T)•8.SFASNO.8essentiallymandatedthatU.S.companiesrequiredtotranslateforeigncurrencyamountsinpreparingconsolidatedfinancialstatementsusethecurrentmethod.•(F)•9.Currencyoptionisacontractthatprovidestherightbutnottheobligationtotradeaforeigncurrencyatasetexchangerateafteragivendate.(F)•四、BriefAnswer•1.What’sthedefinitionforaFunctionalCurrencyinFASBStatementNo.52?WhatarethethreecircumstancesthataFunctionalCurrencybeenChosen(regardingwhichcountrythefunctionalcurrencybelongsto)?Andwhattranslationmethodshouldbeusedineachcircumstance?•FunctionalCurrencyisthecurrencyoftheprimaryeconomicenvironmentinwhichtheforeignsubsidiaryoperatesandgeneratescashflows.•1)theLocalCurrencyisthefunctionalcurrencyCurrentRateMethod.•2)theParent’sCurrencyisthefunctionalcurrencyTemporalMethod•3)Currencyofathirdcountryisthefunctionalcurrency,atwo-steptranslationprocess:Localcurrencytothefunctionalcurrencyusingthetemporalmethod;thefunctionalcurrencytotheparentcurrencyusingthecurrentratemethod.•2.Pleasewritedowntheconceptofforeignexchangeexposureandits’threekinds.•Ameasureofthepotentialforafirm’sprofitability,cashflow,andmarketvaluetochangebecauseofachangeinexchangerates•Translationexposure•Transactionexposure•Economicexposure•3.PleasewritedowntheDifferentassumesoffourforeigncurrencytranslationmethods.•Differentassumes:Whichassetsandliabilitiesaresubjecttoforeigncurrencyexposure•Currentratemethod:allassetsandliabilitiesfacecurrencyrisk.(2’)•Monetary/non-monetarymethod:onlythemonetaryitemsfacecurrencyrisk.(2’)•Current/non-currentmethod:onlythecurrentitemsfacecurrencyrisk.(2’)•Temporalmethod:adjustbalancesheetitemsaccordingtothevaluationbasisusedinfinancialstatements.(2’)•4.Pleaseinterpret:Bidrate;Askrate;theSpreadbetweenbidrateandaskrate.•Bidrate(buyrate):thepriceatwhichafinancialinstitutioniswillingtobuyacurrency.(4’)•Askrate(sellrate,offerrate):thepriceatwhichfinancialinstitutioniswillingt