Question 1

What are the two separate transactions that require recording under the two-transaction perspective?

Accepted Answer

The two separate transactions

Question 2

Mills Inc.had a receivable from a foreign customer that is due in the local currency of the customer (stickles).On December 31, 2018, this receivable for §200,000 was correctly included in Mills' balance sheet at $132,000.When the receivable was collected on February 15, 2019, the U.S.dollar equivalent was $144,000.In Mills' 2019 consolidated income statement, how much should have been reported as a foreign exchange gain?

Accepted Answer

A)  $ 0. 
B)  $36,000. 
C)  $48,000. 
D)  $10,000. 
E)  $12,000. 
A)  $ 0. 
B)  $36,000. 
C)  $48,000. 
D)  $10,000. 
E)  $12,000.

Question 3

A U.S.company sells merchandise to 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 gain 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 gain 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 4

What was the impact on Mosby's 2019 net income as a result of this fair value hedge of a firm commitment?

Accepted Answer

A)  $ 1,800.00 decrease. 
B)  $ 2,500.00 increase. 
C)  $ 2,500.00 decrease. 
D)  $188,760.60 increase. 
E)  $188,760.60 decrease. 
A)  $ 1,800.00 decrease. 
B)  $ 2,500.00 increase. 
C)  $ 2,500.00 decrease. 
D)  $188,760.60 increase. 
E)  $188,760.60 decrease.

Question 5

Yelton Co.just sold inventory for 80,000 euros, which Yelton will collect in sixty days.Briefly describe a hedging transaction Yelton could engage in to reduce its risk of unfavorable exchange rates.

Accepted Answer

Yelton could sign a forward exchange con

Question 6

How does a foreign currency forward contract differ from a foreign currency option?

Accepted Answer

A foreign currency forward contract obli

Question 7

How much foreign exchange gain or loss should be included in Shannon's 2017 income statement?

Accepted Answer

A)  $3,000 gain. 
B)  $3,000 loss. 
C)  $6,000 gain. 
D)  $6,000 loss. 
E)  $7,000 gain. 
A)  $3,000 gain. 
B)  $3,000 loss. 
C)  $6,000 gain. 
D)  $6,000 loss. 
E)  $7,000 gain.

Question 8

Alpha, Inc., a U.S.company, had a receivable from a customer that was denominated in Mexican pesos.On December 31, 2017, this receivable for 75,000 pesos was correctly included in Alpha's balance sheet at $8,000.The receivable was collected on March 2, 2018, when the U.S.equivalent was $6,900.How much foreign exchange gain or loss will Alpha record on the income statement for the year ended December 31, 2018?

Accepted Answer

A)  $1,100 loss. 
B)  $1,100 gain. 
C)  $6,900 loss. 
D)  $6,900 gain. 
E)  $8,000 gain. 
A)  $1,100 loss. 
B)  $1,100 gain. 
C)  $6,900 loss. 
D)  $6,900 gain. 
E)  $8,000 gain.

Question 9

What was the net impact on Mattie's 2018 income as a result of this fair value hedge of a firm commitment?

Accepted Answer

A)  $1,800.00 decrease. 
B)  $1,760.60 decrease. 
C)  $2,240.40 decrease. 
D)  $1,660.40 increase. 
E)  $2,240.60 increase. 
A)  $1,800.00 decrease. 
B)  $1,760.60 decrease. 
C)  $2,240.40 decrease. 
D)  $1,660.40 increase. 
E)  $2,240.60 increase.

Question 10

What is the 2019 effect on net income as a result of these transactions?

Accepted Answer

A)  $195,000 
B)  $201,600 
C)  $201,000 
D)  $202,600 
E)  $203,000 
A)  $195,000 
B)  $201,600 
C)  $201,000 
D)  $202,600 
E)  $203,000

Question 11

What was the impact on Mosby's 2018 net income as a result of this fair value hedge of a firm commitment?

Accepted Answer

A)  $1,760.60 decrease. 
B)  $1,960.60 decrease. 
C)  $1,000.00 decrease. 
D)  $1,760.60 increase. 
E)  $1,960.60 increase. 
A)  $1,760.60 decrease. 
B)  $1,960.60 decrease. 
C)  $1,000.00 decrease. 
D)  $1,760.60 increase. 
E)  $1,960.60 increase.

Question 12

Which of the following statements is true concerning hedge accounting?

Accepted Answer

A)  Hedges of foreign currency firm commitments are used for future sales only. 
B)  Hedges of foreign currency firm commitments are used for future purchases only. 
C)  Hedges of foreign currency firm commitments are used for current sales or purchases. 
D)  Hedges of foreign currency firm commitments are used for future sales or purchases. 
E)  Hedges of foreign currency firm commitments are entered into for speculative purposes. 
A)  Hedges of foreign currency firm commitments are used for future sales only. 
B)  Hedges of foreign currency firm commitments are used for future purchases only. 
C)  Hedges of foreign currency firm commitments are used for current sales or purchases. 
D)  Hedges of foreign currency firm commitments are used for future sales or purchases. 
E)  Hedges of foreign currency firm commitments are entered into for speculative purposes.

Question 13

What journal entry should Eagle prepare on December 31, 2018?

Accepted Answer

The answer of What journal entry should Eagle prepare on...

Question 14

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

Accepted Answer

Accounts receivable

Question 15

What was the overall result of having entered into this hedge of exposure to foreign exchange risk?

Accepted Answer

A)  $0 
B)  $9,000 net loss on the option. 
C)  $9,000 net gain on the option. 
D)  $2,000 net gain on the option. 
E)  $2,000 net loss. 
A)  $0 
B)  $9,000 net loss on the option. 
C)  $9,000 net gain on the option. 
D)  $2,000 net gain on the option. 
E)  $2,000 net loss.

Question 16

On December 1, 2018, Joseph Company, a U.S.company, entered into a three-month forward contract to purchase 50,000 pesos on March 1, 2019, as a fair value hedge of a foreign currency denominated account payable.The following U.S.dollar per peso exchange rates apply:   Joseph's incremental borrowing rate is 12 percent.The present value factor for two months at an annual interest rate of 12 percent is .9803.Which of the following is included in Joseph's December 31, 2018 balance sheet for the forward contract?

Accepted Answer

A)  $5,146.58 asset. 
B)  $5,146.58 liability. 
C)  $ 500.00 liability. 
D)  $ 490.15 asset. 
E)  $ 490.15 liability. 
A)  $5,146.58 asset. 
B)  $5,146.58 liability. 
C)  $ 500.00 liability. 
D)  $ 490.15 asset. 
E)  $ 490.15 liability.

Question 17

What was the net increase or decrease in cash flow from having purchased the foreign currency option to hedge this exposure to foreign exchange risk?

Accepted Answer

A)  $0 
B)  $10,000 increase. 
C)  $10,000 decrease. 
D)  $20,000 increase. 
E)  $20,000 decrease. 
A)  $0 
B)  $10,000 increase. 
C)  $10,000 decrease. 
D)  $20,000 increase. 
E)  $20,000 decrease.

Question 18

Which of the following approaches is used in the United States in accounting for foreign currency transactions?

Accepted Answer

A)  One-transaction perspective; defer foreign exchange gains and losses. 
B)  Two-transaction perspective; accrue foreign exchange gains and losses. 
C)  Three-transaction perspective; defer foreign exchange gains and losses. 
D)  One-transaction perspective; accrue foreign exchange gains and losses. 
E)  Two-transaction perspective; defer foreign exchange gains and losses. 
A)  One-transaction perspective; defer foreign exchange gains and losses. 
B)  Two-transaction perspective; accrue foreign exchange gains and losses. 
C)  Three-transaction perspective; defer foreign exchange gains and losses. 
D)  One-transaction perspective; accrue foreign exchange gains and losses. 
E)  Two-transaction perspective; defer foreign exchange gains and losses.

Question 19

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

Accepted Answer

The event

Question 20

A U.S.company sells merchandise to a foreign company denominated in U.S.dollars.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 gain will result. 
C)  No foreign exchange gain or loss will result. 
D)  If the foreign currency appreciates, a foreign exchange loss will result. 
E)  If the foreign currency depreciates, a foreign exchange loss will result. 
A)  If the foreign currency appreciates, a foreign exchange gain will result. 
B)  If the foreign currency depreciates, a foreign exchange gain will result. 
C)  No foreign exchange gain or loss will result. 
D)  If the foreign currency appreciates, a foreign exchange loss will result. 
E)  If the foreign currency depreciates, a foreign exchange loss will result.

Exam 9: Foreign Currency Transactions and Hedging Foreign Exchange Risk

What are the two separate transactions that require recording under the two-transaction perspective?

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

What was the impact on Mosby's 2019 net income as a result of this fair value hedge of a firm commitment?

Yelton Co.just sold inventory for 80,000 euros, which Yelton will collect in sixty days.Briefly describe a hedging transaction Yelton could engage in to reduce its risk of unfavorable exchange rates.

How does a foreign currency forward contract differ from a foreign currency option?

How much foreign exchange gain or loss should be included in Shannon's 2017 income statement?

What was the net impact on Mattie's 2018 income as a result of this fair value hedge of a firm commitment?

What is the 2019 effect on net income as a result of these transactions?

What was the impact on Mosby's 2018 net income as a result of this fair value hedge of a firm commitment?

Which of the following statements is true concerning hedge accounting?

What journal entry should Eagle prepare on December 31, 2018?

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

What was the overall result of having entered into this hedge of exposure to foreign exchange risk?

What was the net increase or decrease in cash flow from having purchased the foreign currency option to hedge this exposure to foreign exchange risk?

Which of the following approaches is used in the United States in accounting for foreign currency transactions?

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

A U.S.company sells merchandise to a foreign company denominated in U.S.dollars.Which of the following statements is true?

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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