🎯Foreign Currency Transactions: 16 MCQs

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Maroun, CPA 14 November 2024

Hello Ghata,

Thank you for pointing this out! I’ve checked the quiz, and it’s correctly marking Transaction, Balance Sheet, Settlement as the correct answer.
Please try taking the quiz again, and let me know if the issue persists.

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Rich Rawlings 5 September 2025

MCQ #4. Option A “In US$” is technically correct also, right? Since the US company’s financial statements are in US dollars, the foreign currency amount must be converted into US dollar at the exchange rate on the transaction date (option C).

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1. Maroun, CPA 8 September 2025
  
  Hi Rich,
  
  The transaction measurement and reporting requirements are two distinct aspects.
  
  – At the transaction level: The parties can agree to use any currency they like (USD, euros, yen, etc.). That’s why the correct answer to the MCQ is C) In whatever currency is agreed to by the parties. For example, a U.S. company might agree to pay a Japanese supplier in yen.
  
  – At the reporting level: Once the transaction is recorded in the U.S. company’s books, it must ultimately be expressed in U.S. dollars because U.S. GAAP (and the company’s financial statements) require reporting in USD. In practice, this means the foreign-currency transaction is first measured in the agreed currency, and then converted to U.S. dollars using the spot exchange rate on the transaction date.
  
  Thus, you’re right that USD always comes into play for financial reporting. But the MCQ is testing the first step: the fact that the transaction itself can be denominated in whatever currency the parties choose.
  
  I hope this makes sense!
  
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Cyrus Rostami 10 April 2026

Hi. Re MCQ 14

Wouldn’t this also be correct?:

A foreign exchange loss would occur if the foreign currency declines.

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1. Maroun, CPA 12 April 2026
  
  Hello Cyrus,
  
  You are right to question that. There is a typo in choice B. It should read:
  “A foreign exchange gain would occur if the foreign currency declines.”
  Therefore, the question is intended to have only one correct answer, which is “D”.
  
  I’ve updated the question.
  Thank you for bringing this to our attention, and keep up the great work!
  
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🎯Foreign Currency Transactions: 16 MCQs

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