Question

The all-current-rate method dictated by the FASB No. 52 statement requires the translation of all balance sheet accounts at the ________ rate and all income statement items at the ________ rates.

19) A) average; historical B) historical; current C) closing; average D) average; closing

Answer 1

The all-current-rate method dictated by the FASB No. 52 statement requires the translation of all balance sheet accounts at the closing rate and all income statement items at the average rates.

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Therefore, the answer is Option-C) closing; average.

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Reason:

1. Translation using the Current Rate method
   1. If the functional currency is the foreign currency, balances are translated using current method and a translation adjustment is reported on the balance sheet.
   2. Following steps are taken with application of the current rate method:
      1. Total assets and liabilities are translated at the current exchange rate.
      2. Stockholders' equity accounts are translated at appropriate historical rates
      3. All revenue and expense items are translated at the average rate.
      4. Dividends are translated at the exchange rate in effect when issued.
      5. Translation gains and losses are taken to a special accumulated translation adjustment account in stockholder's equity.