Ch11 - Ch11 Student:

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Unformatted text preview: Ch11 Student: ___________________________________________________________________________ Waco Company, a U.S. corporation, acquired machinery for use in its operations from Lyon Manufacturing on October 2, 2008. The purchase price was 60,000 euros, payable in euros on January 15, 2009. Spot rates for euros on various dates are as follows: Waco Company estimates the machinery to have a useful life of 10 years and have no salvage value. Waco Company uses straight-line depreciation. 1. Refer to the above information. For 2008, what is Waco's cost for the machinery and its depreciation expense? A. B. C. D. 2. Refer to the above information. What is Waco's "Accounts Payable to Lyon" on December 31, 2008? A. $60,000 B. $63,000 C. $64,800 D. $66,000 3. Refer to the above information. What is Waco's "Foreign Currency Transaction Gain (Loss)" for 2008? A. $1,800 gain B. $1,800 loss C. $3,000 gain D. $3,000 loss 4. Refer to the above information. Which of the following accounts on Waco's books is (are) denominated in euros at December 31, 2008? A. B. C. D. 5. Refer to the above information. What is Waco's "Foreign Currency Transaction Gain (Loss)" for 2009? A. $1,200 gain B. $1,200 loss C. $1,800 loss D. $1,800 gain 6. A foreign currency transaction gain will be recognized by a U.S. company when it has a receivable from a foreign company A. denominated in dollars and the foreign currency weakens relative to the dollar before payment is received. B. denominated in foreign currency and the foreign currency strengthens relative to the dollar before payment is received. C. denominated in dollars and the foreign currency strengthens relative to the dollar before payment is received. D. denominated in foreign currency and the foreign currency weakens relative to the dollar before payment is received. 7. Which statement below is correct when the direct exchange rate for British pounds increases relative to the U.S. dollar? A. The indirect exchange rate for pounds has increased. B. Exports from the U.S. to England are more expensive. C. Receivables denominated in pounds should not be hedged. D. The U.S. dollar has experienced a weakening. 8. The direct exchange rate and the indirect exchange rate are the same on the: A. B. C. D. 9. A U.S. company regularly sells goods to companies in Japan and denominates the transactions in U.S. dollars. From the U.S. company's perspective, the yen is the: A. B. C. D. 10. If the indirect exchange rate for European euros is 1.2 euros = $1, what amount should be credited to sales on a U.S. company's records if a sale is made to a German company for 60,000 euros? A. $72,000 B. $60,000 C. $50,000 D. $48,000 11. On December 31, 2008, a U.S. company, which had receivables denominated in a foreign currency, failed to recognize the change in the spot rate. On the transaction date, the spot rate was 4 Foreign Currency Units (FCU) to $1; while on the balance sheet date, December 31, 2008, the spot rate was 4.2 FCU to $1. What is the effect of this error on each of the following items? the effect of this error on each of the following items?...
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Ch11 - Ch11 Student:

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