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WK 3 LT Assignement upload - On the balance sheet it would...

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Q11-1). Direct exchange rate would be US currency per unit of foreign currency, whereas indirect exchange rate is foreign currency per unit of US currency. Q11-2). Direct exchange rate would be = (1/1.3623) = 0.7341USD/CAD Q11-3). If the US dollar would strengthen over the Euro clearly it would mean that any and all of the incoming imports from Europe would be less expensive in the United States. This is because the dollar can buy more than the Euro. Q11-4) I would have to believe that foreign currency transaction would involve exchange of currencies on part of a reporting entity, and foreign transactions would not involve any exchange currencies at all Q11-5). Q11-6). The asset and liabilities denominated are measured as per exchange rate at the date of transaction on the transaction in foreign currency.
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Unformatted text preview: On the balance sheet it would be at the current rate of exchange Q11-7) Foreign currency transaction gains and losses are recognized on the day that the transaction is settled on the balance sheet. They are include in determining the net income for the period in which exchange rate change. And are reported on the income statement as well Q11-8) Q11-9) Transaction exposure can be hedged with financial instruments. Q11-10) When or if the dollar weakens the direct exchange rate will increase. Whenever the dollar strengthens then the exchange rate will do the reverse and decrease. With the weak dollar there will be a gain from exposed net asset and with the strengthen dollar there will be a loss. It is as if the two causes the opposite reaction....
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