Chap009 - Chapter 09 - Foreign Currency Transactions and...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk Chapter 09 Foreign Currency Transactions and Hedging Foreign Exchange Risk Multiple Choice Questions 1. Pigskin Co., a U.S. corporation, sold inventory on credit to a British company on April 8, 2011. Pigskin received payment of 35,000 British pounds on May 8, 2011. The exchange rate was £1 = $1.54 on April 8 and £1 = 1.43 on May 8. What amount of foreign exchange gain or loss should be recognized? ( round to the nearest dollar ) A. $10,500 loss B. $10,500 gain C. $1,750 loss D. $3,850 loss E. No gain or loss should be recognized. Norton Co., a U.S. corporation, sold inventory on December 1, 2011, with payment of 10,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: 2. For what amount should Sales be credited on December 1? A. $5,500. B. $16,949. C. $18,182. D. $17,241. E. $16,667. 3. What amount of foreign exchange gain or loss should be recorded on December 31? A. $300 gain. B. $300 loss. C. $0. D. $941 loss. E. $941 gain. 9-1 Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 4. What amount of foreign exchange gain or loss should be recorded on January 30? A. $1,516 gain. B. $1,516 loss. C. $575 loss. D. $500 loss. E. $500 gain. Brisco Bricks purchases raw material from its foreign supplier, Bolivian Clay, on May 8. Payment of 2,000,000 foreign currency units (FC) is due in 30 days. May 31 is Brisco's fiscal year-end. The pertinent exchange rates were as follows: 5. For what amount should Brisco's Accounts Payable be credited on May 8? A. $2,500,000. B. $2,440,000. C. $1,600,000. D. $1,639,344. E. $1,666,667. 6. How much Foreign Exchange Gain or Loss should Brisco record on May 31? A. $2,520,000 gain. B. $20,000 gain. C. $20,000 loss. D. $80,000 gain. E. $80,000 loss. 7. How much US $ will it cost Brisco to finally pay the payable on June 7? A. $1,666,667. B. $2,440,000. C. $2,520,000. D. $2,500,000. E. $2,400,000. 9-2 Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 8. On June 1, CamCo received a signed agreement to sell inventory for ¥500,000. The sale would take place in 90 days. CamCo immediately signed a 90-day forward contract to sell the yen as soon as they are received. The spot rate on June 1 was ¥1 =$.004167, and the 90-day forward rate was ¥1 = $.00427. At what amount would CamCo record the Forward Contract on June 1? A. $2,083. B. $0. C. $2,110. D. $2,532. E. $2,135. 9. Belsen purchased inventory on December 1, 2010. Payment of 200,000 stickles was to be made in sixty days. Also on December 1, Belsen signed a contract to purchase §200,000 in sixty days. The spot rate was §1 = .35714, and the 60-day forward rate was §1 = $.38462. On December 31, the spot rate was §1 = .34483 and the 30-day forward rate was §1 = .38168....
View Full Document

Page1 / 93

Chap009 - Chapter 09 - Foreign Currency Transactions and...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online