Question 1

For speculative derivatives, the change in the fair value of the derivative must be:

Accepted Answer

A)  Utilized to adjust the derivative asset. 
B)  Recognized immediately as a gain or loss in net income. 
C)  Recognized as a loss in other comprehensive income. 
D)  Recognized as a gain in other comprehensive income. 
E)  Recognized as a gain or loss in net income at a later date. 
A)  Utilized to adjust the derivative asset. 
B)  Recognized immediately as a gain or loss in net income. 
C)  Recognized as a loss in other comprehensive income. 
D)  Recognized as a gain in other comprehensive income. 
E)  Recognized as a gain or loss in net income at a later date.

Question 2

Larson Company, a U.S.company, has an India rupee account receivable resulting from an export sale on September 7 to a customer in India.Larson signed a forward contract on September 7 to sell rupees and designated it as a cash flow hedge of a recognized receivable.The spot rate was $.023, and the forward rate was $.021.Which of the following did the U.S.exporter report in net income?

Accepted Answer

A)  Discount revenue. 
B)  Premium revenue. 
C)  Discount expense. 
D)  Premium expense. 
E)  Both discount revenue and premium expense. 
A)  Discount revenue. 
B)  Premium revenue. 
C)  Discount expense. 
D)  Premium expense. 
E)  Both discount revenue and premium expense.

Question 3

What amount of foreign exchange gain or loss should be recorded on January 30?

Accepted Answer

A)  $1,516 gain. 
B)  $1,516 loss. 
C)  $575 loss. 
D)  $500 loss. 
E)  $500 gain. 
A)  $1,516 gain. 
B)  $1,516 loss. 
C)  $575 loss. 
D)  $500 loss. 
E)  $500 gain.

Question 4

What amount will Coyote Corp.report in its 2018 balance sheet for Accounts payable?

Accepted Answer

Accounts payable ((6

Question 5

A U.S.company buys merchandise from a foreign company denominated in the foreign currency.Which of the following statements is true?

Accepted Answer

A)  If the foreign currency appreciates, a foreign exchange gain will result. 
B)  If the foreign currency depreciates, a foreign exchange loss will result. 
C)  No foreign exchange gain or loss will result. 
D)  If the foreign currency appreciates, a foreign exchange loss will result. 
E)  Any gain or loss will be included in comprehensive income. 
A)  If the foreign currency appreciates, a foreign exchange gain will result. 
B)  If the foreign currency depreciates, a foreign exchange loss will result. 
C)  No foreign exchange gain or loss will result. 
D)  If the foreign currency appreciates, a foreign exchange loss will result. 
E)  Any gain or loss will be included in comprehensive income.

Question 6

Gaw Produce Company purchased inventory from a Japanese company on December 18, 2018.Payment of 4,000,000 yen (¥) was due on January 18, 2019.Exchange rates between the dollar and the yen were as follows:
   Required:
Prepare all journal entries for Gaw Produce Co.in connection with the purchase and payment.

Accepted Answer

The answer of Gaw Produce Company purchased inventory from a...

Question 7

What amount will Coyote Corp.report in its 2018 balance sheet for Inventory?

Accepted Answer

Inventory

Question 8

Angela, Inc., a U.S.company, had a euro receivable from exports to Spain and a British pound payable resulting from imports from England.Angela recorded foreign exchange gain related to both its euro receivable and pound payable.Did the foreign currencies increase or decrease in dollar value from the date of the transaction to the settlement date?

Accepted Answer

The answer of Angela, Inc., a U.S.company, had a euro...

Question 9

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at initiation date requires which of the following?

Accepted Answer

A)  1. Recognize the transaction (sale or purchase) and foreign currency denominated asset or liability 2. Recognize option as an asset (purchase price is fair value) 
B)  1. No entry related to the firm commitment (zero value) 2. No entry related to forward contract (zero fair value) 
C)  1. Recognize the transaction (sale or purchase) and foreign currency denominated asset or liability 2. No entry related to forward contract (zero fair value) 
D)  1. Recognize the transaction (sale or purchase) 2. Recognize the option as a liability 
E)  1. None. No journal entry is required. 
A)  1. Recognize the transaction (sale or purchase) and foreign currency denominated asset or liability 2. Recognize option as an asset (purchase price is fair value) 
B)  1. No entry related to the firm commitment (zero value) 2. No entry related to forward contract (zero fair value) 
C)  1. Recognize the transaction (sale or purchase) and foreign currency denominated asset or liability 2. No entry related to forward contract (zero fair value) 
D)  1. Recognize the transaction (sale or purchase) 2. Recognize the option as a liability 
E)  1. None. No journal entry is required.

Question 10

Which statement is true regarding a foreign currency option?

Accepted Answer

A)  A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future. 
B)  A foreign currency option gives the holder the obligation to only sell foreign currency in the future. 
C)  A foreign currency option gives the holder the obligation to only buy foreign currency in the future. 
D)  A foreign currency option gives the holder the right but not the obligation to buy or sell foreign currency in the future. 
E)  A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future at the spot rate on the future date. 
A)  A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future. 
B)  A foreign currency option gives the holder the obligation to only sell foreign currency in the future. 
C)  A foreign currency option gives the holder the obligation to only buy foreign currency in the future. 
D)  A foreign currency option gives the holder the right but not the obligation to buy or sell foreign currency in the future. 
E)  A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future at the spot rate on the future date.

Question 11

Meisner Co.ordered parts costing §100,000 for a foreign supplier on May 12 when the spot rate was $.24 per stickle.A one-month forward contract was signed on that date to purchase §100,000 at a forward rate of $.25 per stickle.On June 12, when the parts were received and payment was made, the spot rate was $.28 per stickle.At what amount should inventory be reported?

Accepted Answer

A)  $ 0. 
B)  $28,000. 
C)  $24,000. 
D)  $25,000. 
E)  $ 2,000. 
A)  $ 0. 
B)  $28,000. 
C)  $24,000. 
D)  $25,000. 
E)  $ 2,000.

Question 12

What amount will Coyote Corp.report in its 2018 income statement for Cost of goods sold?

Accepted Answer

Cost of goods sold (

Question 13

Atherton, Inc., a U.S.company, expects to order goods from a foreign supplier at a price of 100,000 lira, with delivery and payment to be made on April 17.On January 17, Atherton purchased a three-month call option on 100,000 lira and designated this option as a cash flow hedge of a forecasted foreign currency transaction.The following exchange rates apply: Option Strike Price $ 4.34
Option Cost $5,000
January 17 Spot Rate $ 4.34
April 17 Spot Rate $ 4.26
What amount will Atherton include as an option expense in net income for the period January 17 to April 17?

Accepted Answer

A)  $4,000 
B)  $4,260 
C)  $4,340 
D)  $5,000 
E)  $5,260 
A)  $4,000 
B)  $4,260 
C)  $4,340 
D)  $5,000 
E)  $5,260

Question 14

Compute the fair value of the foreign currency option at February 1, 2019.

Accepted Answer

A)  $6,000. 
B)  $4,500. 
C)  $3,000. 
D)  $7,500. 
E)  $1,500. 
A)  $6,000. 
B)  $4,500. 
C)  $3,000. 
D)  $7,500. 
E)  $1,500.

Question 15

U.S.GAAP provides guidance for hedges of all the following sources of foreign exchange risk except

Accepted Answer

A)  Recognized foreign currency denominated assets and liabilities. 
B)  Unrecognized foreign currency firm commitments. 
C)  Forecasted foreign currency denominated transactions. 
D)  Net investment in foreign operations. 
E)  Deferred foreign currency gains and losses. 
A)  Recognized foreign currency denominated assets and liabilities. 
B)  Unrecognized foreign currency firm commitments. 
C)  Forecasted foreign currency denominated transactions. 
D)  Net investment in foreign operations. 
E)  Deferred foreign currency gains and losses.

Question 16

(A.) Assume this hedge is designated as a cash flow hedge.Prepare the journal entries relating to the transaction and the forward contract.
(B.) Compute the effect on 2018 net income.
(C.) Compute the effect on 2019 net income.

Accepted Answer

@#IMG-DLM& ¹ [(.30 - .28) 96,00

Question 17

Lawrence Company, a U.S.company, ordered parts costing 1,000,000 Thailand bahts from a foreign supplier on July 7 when the spot rate was $.025 per baht.A one-month forward contract was signed on that date to purchase 1,000,000 bahts at a rate of $.027.The forward contract is properly designated as a fair value hedge of the 1,000,000 baht firm commitment.On August 7, when the parts are received, the spot rate is $.028.What is the amount of accounts payable that will be paid at this date?

Accepted Answer

A)  $20,000. 
B)  $20,100. 
C)  $25,000. 
D)  $27,000. 
E)  $28,000. 
A)  $20,000. 
B)  $20,100. 
C)  $25,000. 
D)  $27,000. 
E)  $28,000.

Question 18

Assuming a forward contract was entered into on December 16, what would be the net impact on Car Corp.'s 2018 income statement related to this transaction? Assume an annual interest rate of 12% and a fair value hedge.The present value for one half-month at 12% is .9950.

Accepted Answer

A)  $ 700 (gain). 
B)  $ 700 (loss). 
C)  $ 995 (gain). 
D)  $ 300 (loss). 
E)  $ 298 (gain). 
A)  $ 700 (gain). 
B)  $ 700 (loss). 
C)  $ 995 (gain). 
D)  $ 300 (loss). 
E)  $ 298 (gain).

Question 19

Williams, Inc., a U.S.company, has a Japanese yen account receivable resulting from an export sale on March 1 to a customer in Japan.The exporter signed a forward contract on March 1 to sell yen and designated it as a cash flow hedge of a recognized receivable.The spot rate was $.0094, and the forward rate was $.0095.Which of the following did the U.S.exporter report in net income?

Accepted Answer

A)  Discount revenue. 
B)  Premium revenue. 
C)  Discount expense. 
D)  Premium expense. 
E)  Both discount revenue and premium expense. 
A)  Discount revenue. 
B)  Premium revenue. 
C)  Discount expense. 
D)  Premium expense. 
E)  Both discount revenue and premium expense.

Question 20

What happens when a U.S.company sells goods denominated in a foreign currency and the foreign currency depreciates?

Accepted Answer

The event

Exam 9: Foreign Currency Transactions and Hedging Foreign Exchange Risk

For speculative derivatives, the change in the fair value of the derivative must be:

What amount of foreign exchange gain or loss should be recorded on January 30?

What amount will Coyote Corp.report in its 2018 balance sheet for Accounts payable?

A U.S.company buys merchandise from a foreign company denominated in the foreign currency.Which of the following statements is true?

What amount will Coyote Corp.report in its 2018 balance sheet for Inventory?

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at initiation date requires which of the following?

Which statement is true regarding a foreign currency option?

What amount will Coyote Corp.report in its 2018 income statement for Cost of goods sold?

Compute the fair value of the foreign currency option at February 1, 2019.

U.S.GAAP provides guidance for hedges of all the following sources of foreign exchange risk except

(A.) Assume this hedge is designated as a cash flow hedge.Prepare the journal entries relating to the transaction and the forward contract. (B.) Compute the effect on 2018 net income. (C.) Compute the effect on 2019 net income.

Assuming a forward contract was entered into on December 16, what would be the net impact on Car Corp.'s 2018 income statement related to this transaction? Assume an annual interest rate of 12% and a fair value hedge.The present value for one half-month at 12% is .9950.

What happens when a U.S.company sells goods denominated in a foreign currency and the foreign currency depreciates?

The Equity Method of Accounting for Investments

A: the Equity Method of Accounting for Investments

Consolidation of Financial Information

A: Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

A: Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

A: Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements Intra-Entity Asset Transactions

A: Consolidated Financial Statements Intra-Entity Asset Transactions

Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

A: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

A: Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

A: Segment and Interim Reporting

A: Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

A: Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

A: Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

A: Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

A: Accounting for Legal Reorganizations and Liquidations

Partnerships: Formation and Operation

A: Partnerships: Formation and Operation

Partnerships: Termination and Liquidation

A: Partnerships: Termination and Liquidation

Accounting for State and Local Governments, Part I

A: Accounting for State and Local Governments, Part I

Accounting for State and Local Governments, Part II

A: Accounting for State and Local Governments, Part II

Accounting for Not-For-Profit Entities

A: Accounting for Not-For-Profit Entities

Accounting for Estates and Trusts

A: Accounting for Estates and Trusts

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