23. A U.S. company buys merchandise from a foreign company denominated in
U.S. dollars. Which of the following statements is true?
24. A U.S. company buys merchandise from a foreign company denominated in
the foreign currency. Which of the following statements is true?
25. U.S. GAAP provides guidance for hedges of all the following sources of
foreign exchange risk except
26. All of the following data may be needed to determine the fair value of a
forward contract at any point in time except
27. A forward contract may be used for which of the following?
1) A fair value hedge of an asset.
2) A cash flow hedge of an asset.
3) A fair value hedge of a liability.
4) A cash flow hedge of a liability.
28. A company has a discount on a forward contract for a foreign currency
denominated asset. How is the discount recognized over the life of the contract
under fair value hedge accounting?
29. Which of the following statements is true concerning hedge accounting?
30. All of the following hedges are used for future purchase/sale transactions
except
31. On December 1, 2011, Keenan Company, a U.S. firm, sold merchandise to
Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the
receivable is due on February 1, 2012. Keenan purchased a foreign currency put
option with a strike price of $.97 (U.S.) on December 1, 2011. This foreign
currency option is designated as a cash flow hedge. Relevant exchange rates
follow:
Compute the fair value of the foreign currency option at December 1, 2011.
32. On December 1, 2011, Keenan Company, a U.S. firm, sold merchandise to
Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the
receivable is due on February 1, 2012. Keenan purchased a foreign currency put
option with a strike price of $.97 (U.S.) on December 1, 2011. This foreign
currency option is designated as a cash flow hedge. Relevant exchange rates
follow:
Compute the fair value of the foreign currency option at December 31, 2011.
33. On December 1, 2011, Keenan Company, a U.S. firm, sold merchandise to
Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the
receivable is due on February 1, 2012. Keenan purchased a foreign currency put
option with a strike price of $.97 (U.S.) on December 1, 2011. This foreign
currency option is designated as a cash flow hedge. Relevant exchange rates
follow:
Compute the fair value of the foreign currency option at February 1, 2012.
34. On December 1, 2011, Keenan Company, a U.S. firm, sold merchandise to
Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the
receivable is due on February 1, 2012. Keenan purchased a foreign currency put
option with a strike price of $.97 (U.S.) on December 1, 2011. This foreign
currency option is designated as a cash flow hedge. Relevant exchange rates
follow:
Compute the U.S. dollars received on February 1, 2012.
35. Which of the following approaches is used in the United States in
accounting for foreign currency transactions?
36. When a U.S. company purchases parts from a foreign company, which of
the following will result in zero foreign exchange gain or loss?
37. Alpha, Inc., a U.S. company, had a receivable from a customer that was
denominated in Mexican pesos. On December 31, 2010, this receivable for 75,000
pesos was correctly included in Alpha’s balance sheet at $8,000. The receivable
was collected on March 2, 2011, 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, 2011?
38. On April 1, 2010, Shannon Company, a U.S. company, borrowed 100,000
euros from a foreign bank by signing an interest-bearing note due April 1, 2011.
The dollar value of the loan was as follows:
How much foreign exchange gain or loss should be included in Shannon’s 2010
income statement?
39. On April 1, 2010, Shannon Company, a U.S. company, borrowed 100,000
euros from a foreign bank by signing an interest-bearing note due April 1, 2011.
The dollar value of the loan was as follows:
How much foreign exchange gain or loss should be included in Shannon’s 2011
income statement?
40. On April 1, 2010, Shannon Company, a U.S. company, borrowed 100,000
euros from a foreign bank by signing an interest-bearing note due April 1, 2011.
The dollar value of the loan was as follows:
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?
41. Frankfurter Company, a U.S. company, had a ruble receivable from exports
to Russia and a euro payable resulting from imports from Italy. Frankfurter
recorded foreign exchange loss related to both its ruble receivable and euro
payable. Did the foreign currencies increase or decrease in dollar value from the
date of the transaction to the settlement date?
42. Parker Corp., a U.S. company, had the following foreign currency
transactions during 2011:
(1.) Purchased merchandise from a foreign supplier on July 5, 2011 for the U.S.
dollar equivalent of $80,000 and paid the invoice on August 3, 2011 at the U.S.
dollar equivalent of $82,000.
(2.) On October 1, 2011 borrowed the U.S. dollar equivalent of $872,000
evidenced by a non-interest-bearing note payable in euros on October 1, 2011.
The U.S. dollar equivalent of the note amount was $860,000 on December 31,
2011, and $881,000 on October 1, 2012.
What amount should be included as a foreign exchange gain or loss from the two
transactions for 2011?
43. Parker Corp., a U.S. company, had the following foreign currency
transactions during 2011:
(1.) Purchased merchandise from a foreign supplier on July 5, 2011 for the U.S.
dollar equivalent of $80,000 and paid the invoice on August 3, 2011 at the U.S.
dollar equivalent of $82,000.
(2.) On October 1, 2011 borrowed the U.S. dollar equivalent of $872,000
evidenced by a non-interest-bearing note payable in euros on October 1, 2011.
The U.S. dollar equivalent of the note amount was $860,000 on December 31,
2011, and $881,000 on October 1, 2012.
What amount should be included as a foreign exchange gain or loss from the two
transactions for 2012?