Correct longer period to amortize the patent and the

Correct
longer period to amortize the patent and the straight-line method to depreciate the fixed asset.
Your Answer

5/30/22, 10:44 AM CMA Exam Review - Part 2 - Assessment Review
Question 6
2.A.4.a
forex.fluctuations.tb.008_2104
LOS: 2.A.4.a
Lesson Reference: Foreign Exchange Fluctuations
Difficulty: hard
Bloom Code: 5
On August 11, Doggie Door United, a U.S. company, purchased equipment for €15,000 from Spain. On the same day, the company also sold products for
€25,000 to Germany. At the end of the month, the euro had weakened in value relative to the U.S. dollar. Which of the following statements is true
regarding these transactions’ change in value and Doggie Door’s net working capital as of August 31?
Accounts payable will increase, accounts receivable will increase, net working capital will increase
Accounts payable will decrease, accounts receivable will increase, net working capital will increase
Accounts payable will decrease, accounts receivable will decrease, net working capital will not change
Rationale

Accounts payable will increase, accounts receivable will increase, net working capital will increase
This answer is incorrect. This would be the results if the euro had strengthened relative to the U.S. dollar.
Rationale

Accounts payable will decrease, accounts receivable will decrease, net working capital will decrease
This answer is correct. If the euro weakens relative to the U.S. dollar, then each euro will purchase fewer U.S. dollars. Therefore, the accounts
receivable balance will drop in value. Accounts payable also will decrease. Net working capital = Current assets − Current liabilities. Because the
accounts receivable balance is much larger than the accounts payable balance, accounts receivable will drop by a larger amount than accounts
payable. This will result in a decrease in net working capital.
Rationale

Accounts payable will decrease, accounts receivable will increase, net working capital will increase
This answer is incorrect. Accounts payable and accounts receivable would both move in the same direction.
Rationale

Accounts payable will decrease, accounts receivable will decrease, net working capital will not change
This answer is incorrect. Net working capital = Current assets − Current liabilities. Because the accounts receivable balance is much larger than the
accounts payable balance, accounts receivable will drop by a larger amount than accounts payable. This will result in a decrease in net working
capital.
Accounts payable will decrease, accounts receivable will decrease, net working capital will decrease
Correct
7/67