Becker CPA Review, PassMaster Questions
Lecture: Financial 7
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Corr Ans: A
CPA-00928 FARE R03 #4
On November 2, 2001, Platt Co. entered into a 90-day futures contract to purchase 50,000 Swiss francs
when the contract quote was $.70.
The purchase was for speculation in price movement.
exchange rates existed during the contract period:
November 2, 2001
December 31, 2001
January 30, 2002
What amount should Platt report as foreign currency exchange loss in its income statement for the year
ended December 31, 2001?
Choice "a" is correct.
Any gain or loss on futures contracts not designated as a hedge is recognized in
The loss as of December 31, 2001 is:
30-day futures rate on 12/31/01
The December 31, 2001 30-day futures rate is used since, as of December 31, 2001, 30 days remain in
the contract period.
If the futures contract were purchased at year-end instead of on November 2, 2001,
5¢ per Swiss franc would have been saved.
It would have only cost us 65¢ per Swiss franc instead of our
contract rate of 70¢; therefore, 5¢ per Swiss franc was recorded as a loss.
Corr Ans: D
CPA-00930 FARE C98 #1
Fair value disclosure of financial instruments may be made in the:
Choice "d" is correct.
The fair value of financial instruments may be disclosed in either the body of the
financial statements or in the footnotes.
If disclosed in the footnotes, one footnote must have a summary
table showing the fair values and related carrying values.
Corr Ans: B
CPA-00931 FARE C98 #2
Disclosures about the following kinds of risks are required for most financial instruments.