A Canadian subsidiary of a U.S. parent firm is instructed to bill an export to the parent in U.S. dollars. The Canadian subsidiary records the accounts receivable in Canadian dollars and notes a profit on the sale of goods. Later, when the U.S. parent pays the subsidiary the contracted U.S. dollar amount, the Canadian dollar has appreciated 10% against the U.S. dollar. In this example, the Canadian subsidiary will record a

True

False

in magnitude only

in sign only

in neither magnitude nor sign

in both magnitude and sign

gain of $25,000

loss of $25,000

gain of $525,000

loss of euro 525,000

reserve for accounting losses

accounting reserve adjustment account

cumulative translation adjustment account

none of the above; translation gains and losses flow through into the income statement

gain of euro 25,000

loss of euro 25,000

gain of £25,000

loss of £25,000

forward

current

historical

The exchange rate to be used varies with the situation

True

False

True

False

A U.S based manufacturing firm with a fully owned subsidiary that generates earnings in Japan. The subsidiary always keeps and reinvests the earnings

A U.S. based retailer with a fully owned subsidiary in Canada that generates losses in Canada that the parent firm occasionally covers

A U.S. based firm with a subsidiary in Britain that occasionally remits earnings to the parent firm

All of the above are subject to translation exposure

Công ty đa quốc gia đối diện với tui ro tỷ giá nhiều hơn so với công ty nội địa

Công ty đa quốc gia có chi phí đại diện cao hơn so với công ty nội địa

Công ty đa quốc gia thường có khả năng tiếp cận thị trường vốn quốc tế tốt hơn so với công ty nội địa

Công ty đa quốc gia đối diện với rủi ro quốc gia thấp hơn so với công ty nội địa