Exam 11: Multinational Accounting: Foreign Currency Transactions and Financial Instruments

Suppose the direct foreign exchange rates in U.S.dollars are as follows: 1 Swiss franc = $1.0371 1 Swedish krona = $0.1526 -Based on the information given above,how many Swiss francs are required to purchase goods costing $5,000 U.S.?

Highland Company sold goods to an Egyptian company for 350,000 Egyptian pounds on December 6,20X3,with payment due on January 15,20X4.The exchange rates were as follows: -Based on the preceding information,what is Highland's overall net gain or net loss from its foreign currency exposure related to this transaction?

Suppose the direct foreign exchange rates in U.S.dollars are: 1 Singapore dollar = $0.7025 1 Cyprus pound = $2.5132 -Based on the information given above,how many Singapore dollars are required to purchase goods costing 10,000 US dollars?

Suppose the direct foreign exchange rates in U.S.dollars are as follows: 1 Swiss franc = $1.0371 1 Swedish krona = $0.1526 -Based on the information given above,the indirect exchange rates for the Swiss franc and the Swedish krona (from a U.S.perspective)are

The fair market value of a near-month call option with a strike price of $45 is $5,when the stock is trading at $48. -Based on the preceding information,the call option:

Tinitoys,Inc. ,a domestic company,purchased inventory from a Brazilian company for 500,000 Brazilian reals (Br.reals)on May 1,20X2.Payment is due on June 30,20X2.On May 1,20X2,Tinitoys also entered into a 60-day forward contract to purchase 500,000 Brazilian reals.The forward contract is not designated as a hedge.Tinitoys' fiscal year ends on May 31.The direct exchange rates were as follows: -Based on the preceding information,the entries on June 30,20X2,include a

Myway Company sold equipment to a Canadian company for 100,000 Canadian dollars (C$)on January 1,20X9 with settlement to be in 60 days.On the same date,Myway entered into a 60-day forward contract to sell 100,000 Canadian dollars at a forward rate of 1 C$ = $.94 in order to manage its exposed foreign currency receivable.The forward contract is not designated as a hedge.The spot rates were: -Based on the preceding information,the entry to revalue foreign currency payable to current U.S.dollar value on March 1 will have:

Heavy Company sold metal scrap to a Brazilian company for 200,000 Brazilian reals on December 1,20X8,with payment due on January 20,20X9.The exchange rates were: -Based on the preceding information,what is the Heavy's overall net gain or net loss from its foreign currency exposure related to this transaction?

Highland Company sold goods to an Egyptian company for 350,000 Egyptian pounds on December 6,20X3,with payment due on January 15,20X4.The exchange rates were as follows: -Based on the preceding information,which of the following is true of the dollar's movement vis-à-vis the Egyptian pound during the period?

Company X issues variable-rate debt but wishes to fix its interest rates because it believes the variable rate may increase.Company Y has a fixed-rate bond but is looking for a variable-rate interest because it assumes the interest rates may decrease.The two companies agree to exchange cash flows.Such an arrangement is called:

On November 1,20X8,Denver Company borrowed 500,000 local currency units (LCU)from a foreign lender evidenced by an interest-bearing note due on November 1,20X9,which is denominated in the currency of the lender.The U.S.dollar equivalent of the note principal was as follows: In its income statement for 20X9,what amount should Denver include as a foreign exchange gain or loss on the note principal?

On November 6,20X7,Zucor Corp.purchased merchandise from an unaffiliated foreign company for 50,000 units of the foreign company's local currency.On that date,the spot rate was $1.259.Zucor paid the bill in full three months later when the spot rate was $1.258.The spot rate was $1.255 on December 31,20X7.What amount should Zucor report as a foreign currency transaction gain in its income statement for the year ended December 31,20X7?

On September 3,20X8,Jackson Corporation purchases goods for a U.S.dollar equivalent of $17,000 from a Swiss company.The transaction is denominated in Swiss francs (SFr).The payment is made on October 10.The exchange rates were: What entry is required to revalue foreign currency payable to U.S.dollar equivalent value on October 10?

On December 1,20X8,Hedge Company entered into a 60-day speculative forward contract to sell 200,000 British pounds (£)at a forward rate of £1 = $1.78.On the same day it purchased a 60-day speculative forward contract to buy 100,000 euros (€)at a forward rate of €1 = $1.42. The rates are as follows: Hedge had no other speculation transactions in 20X8 and 20X9.Ignore taxes. -Based on the preceding information,what is the overall effect of speculation on 20X8 net income?

On December 5,20X8,Texas based Imperial Corporation purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR),to be paid on January 10,20X9.The transaction is denominated in Saudi riyals.Imperial's fiscal year ends on December 31,and its reporting currency is the U.S.dollar.The exchange rates are: -Based on the preceding information,what was the overall foreign currency gain or loss on the accounts payable transaction?

On December 1,20X8,Denizen Corporation entered into a 120-day forward contract to purchase 200,000 Canadian dollars (C$).Denizen's fiscal year ends on December 31.The forward contract was to hedge a firm commitment agreement made on December 1,20X8,to purchase electronic goods on January 30,with payment due on March 31,20X8.The derivative is designated as a fair value hedge.The direct exchange rates follow: Required: Prepare all journal entries for Denizen Corporation.

Taste Bits Inc.purchased chocolates from Switzerland for 200,000 Swiss francs (SFr)on December 1,20X8.Payment is due on January 30,20X9.On December 1,20X8,the company also entered into a 60-day forward contract to purchase 200,000 Swiss francs.The forward contract is not designated as a hedge.The rates were as follows: -Based on the preceding information,the entries on January 30,20X9 related to the forward contract include a:

Spiraling crude oil prices prompted AMAR Company to purchase call options on oil as a price-risk-hedging device to hedge the expected increase in prices on an anticipated purchase of oil.On November 30,20X8,AMAR purchases call options for 20,000 barrels of oil at $100 per barrel at a premium of $4 per barrel,with a February 1,20X9,call date.The following is the pricing information for the term of the call: The information for the change in the fair value of the options follows: On February 1,20X9,AMAR sells the options at their value on that date and acquires 20,000 barrels of oil at the spot price.On April 1,20X9,AMAR sells the oil for $112 per barrel. -Based on the preceding information,in the entry to record the increase in the intrinsic value of the options on December 31,20X8,

Taste Bits Inc.purchased chocolates from Switzerland for 200,000 Swiss francs (SFr)on December 1,20X8.Payment is due on January 30,20X9.On December 1,20X8,the company also entered into a 60-day forward contract to purchase 200,000 Swiss francs.The forward contract is not designated as a hedge.The rates were as follows: -Based on the preceding information,the entries on January 30,20X9 related to the forward contract include a:

Suppose the direct foreign exchange rates in U.S.dollars are: 1 Singapore dollar = $0.7025 1 Cyprus pound = $2.5132 -Based on the information given above,how many U.S.dollars must be paid for a purchase of citrus fruits costing 10,000 Cyprus pounds?