Chapter9ed12

Chapter9ed12 - Chapter 12 Test Bank FOREIGN CURRENCY...

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Chapter 12 Test Bank FOREIGN CURRENCY CONCEPTS AND TRANSACTIONS Multiple Choice Questions LO1 1. On May 1, 20X3, Emu Corporation purchased merchandise from a Danish firm for 198,000 Danish krone when the spot rate for krone was 5.200 krone per dollar. The account payable was denominated in krone. Emu settled the account on September 1 when the spot rate for krone was 5.345 krone per dollar. How much cash will Emu have to disburse to settle the account? a. $ 37,043.97 b. $ 38,076.93 c. $1,029,600.00 d. $1,058,310.00 LO1 2. Cassowary Corporation’s balance sheet at December 31, 20X3 included a $20,400 account receivable from Quail Corporation of Australia. The account receivable is denominated as 30,000 Australian dollars (A$). What entry should Cassowary make on January 16, 20X3 when the account receivable is collected and the exchange rate for A$ is $.67? a. Cash 20,100 Accounts Receivable 20,100 b. Cash 20,100 Exchange Loss 300 Accounts Receivable 20,400 c. Cash 20,400 Accounts Receivable 20,400 d. Cash 20,700 Accounts Receivable 20,400 Exchange Gain 300 32
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LO2 3. The exchange rates between the Australian dollar and the US dollar were as follows: Jun 1 1$AUS = $.71US Jul 1 1$AUS = $.73US Aug 1 1$AUS = $.79US Sep 1 1$AUS = $.83US This chart shows a: a. strengthening Australian Dollar which makes it less expensive for Americans to buy Australian goods. b. weakening Australian dollar which makes it less expensive for Americans to buy Australian goods. c. strengthening Australian dollar which makes it more expensive for Americans to buy Australian goods. d. weakening Australian dollar which makes it more expensive for Americans to buy Australian goods. LO2 4. Which of the following factors will affect the spread between spot and forward rates? a. the current cross rate between two currencies b. the length of time for the forward contract c. the currency denominated as the domestic currency d. all of the above will affect the spread LO2 5. A US importer that purchased merchandise from a South Korean firm would be exposed to a net exchange gain on the unpaid balance if the: a. dollar weakened relative to the Korean won and the won was the denominated currency. b. dollar weakened relative to the Korean won and the dollar was the denominated currency. c. dollar strengthened relative to the Korean won and the won was the denominated currency. d. dollar strengthened relative to the Korean won and the dollar was the denominated currency. Use the following information for Questions 6 and 7. On November 1, 20X3, Magpie Corporation sold merchandise to William Tell Corporation, a Swiss firm. Magpie measures and records the account receivable from the sale at $78,000. William Tell paid for this account on November 30, 20X3. Spot rates for Swiss francs on November 1 and November 30, respectively, were $0.80 and $0.78.
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Chapter9ed12 - Chapter 12 Test Bank FOREIGN CURRENCY...

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