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40 Minutes, Strong PROBLEM 15.6B
FOX GAMES
a.
Oct 25 Inventory of Raw Materials 1,200,000
Accounts Payable (Sutaki
)
1,200,000
To record purchase of 15,000 parts from
Sutaki for ¥120,000,000 due in 30 days. Exchange
rate, $.01 (¥120,000,000 x $.01 = $1,200,000).
To record sale of 500 consoles to British Vibes
for £200,000, due in 30 days. Exchange rate $1.60
(£200,000 x $1.60 = $320,000).
and to recognize gain from decline in exchange rate:
Original account balance 1,200,000$
Amount paid 1,150,000
Gain from decline in exchange rate 50,000$
To record purchase of 5,000 black cases from Swiss
Plastics for SFr80,000, due in 60 days. Exchange
rate, $.70 (SFr80,000 x $.70 = $56,000).
Collected £200,000 receivable from British Vibes
when exchange rate was $1.55 per British pound:
Original receivable 320,000$
Amount collected (£200,000 x $1.55) 310,000
Loss from fall in exchange rate 10,000$
To record sale of 6,000 consoles to Sounds fo
r
General Journal
PROBLEM 15.6B
FOX GAMES (concluded)
To adjust balance of SFr80,000 liability to Swiss
Plastics to amount indicated by year-end exchange rate:
Original account balance 56,000$
Adjusted balance (SFr80,000 x $.68) 54,400
Required adjustment (gain) 1,600$
To adjust balance of NOK40,000,000 receivable from
Sounds to amount indicated by year-end exchange rate:
Original 8,000,000$
Adjusted balance
(NOK40,000,000 x $.18) 7,200,000
Required adjustment (loss) 800,000$
d. Computation of exchange rate for yen on Nov. 24:
Amount paid, $1,150,000, divided by liability in yen
,
¥120,000,000, equals exchange rate, $.0096 per yen.
e. (1)
General Journal
Fox Games could have hedged its position in foreign accounts payable by purchasing an
equivalent amount of future contracts in these currencies, maturing at the same time as
(2) Fox’s position in its foreign receivables could be hedged by selling future contracts in
20 Minutes, Medium PROBLEM 15.7B
FCPA VIOLATIONS
Under the amended FCPA, activities a and d are illegal because both payments are intended to
help company P obtain business it may not otherwise have been awarded. Activities b and c
40 Minutes, Medium CASE 15.1
BRISTOW, INC.
SOLUTIONS TO CRITICAL THINKING CASES
There are many factors that must be taken into account when faced with multiple globalization
strategy choices. These factors include (but are not limited to) control issues, feasibility issues,
To maintain a high level of control and reduce shipping times, Bristow may opt to purchase the
local company and operate it as a wholly-owned subsidiary. This option would likely involve a
If issues of control are not of primary importance, Bristow should consider licensing its
technology to a domestic firm or establishing a joint venture with Kale. A licensing agreement
40 Minutes, Medium CASE 15.3
U.S. FOREIGN TRADE ZONES
INTERNET
b.
Assembled Re
p
acka
g
ed Cleaned
Tested Destro
y
ed Stored
The National Association of Foreign Trade Zones home page is located at:
Government considers legally outside of the U.S. Customs territory. Certain types of
merchandise can be imported into a Zone without going through formal Customs entry
procedures or paying import duties.
The answers will differ depending on the state. The activities that can occur in a foreign
trade zone include the following:
2.
ATOFINA Petrochemicals, Inc. BMW Manufacturing Corp.
Caterpillar, Inc. Conair Corporation
3. The following benefits are listed on the Web site:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Merchandise may be exported and returned to an FTZ without duty payment.
No duty is owed on in-bound, zone-to-zone transfer of FTZ merchandise.
Spare parts may be stored, returned, or destroyed without duty payment.
Delays in Customs clearances and duty drawback are eliminated.
Duties are not owed on labor, overhead, or profit attributed to FTZ production
operations.
Quality control inspections can identify substandard goods to be destroyed or
returned without duty payment.
The following companies are some of the companies using FTZs:
Deferral of customs duties: Customs duties are paid only when and if merchandise
is transferred into U.S. Customs and Border Protection territory.
Reduction of duties: FTZ users can pay the duty rate on component material or
merchandise produced from component material, whichever is lower.
Duties are reduced or eliminated on materials subject to defect, damage,
obsolescence, waste or scrap.
Customs duties are never paid on merchandise exported from a zone.
30 Minutes, Medium CASE 15.
4
INTERNATIONAL CORPORATE GOVERNANCE
ETHICS, FRAUD & CORPORATE GOVERNANCE
1. The financial and operating results of the company.
2. Company objectives.
3. Major share ownership and voting rights.
4. Remuneration policy for members of the board and key executives, and
5. Related party transactions.
6. Foreseeable risk factors.
Many countries around the world have different standards for disclosure, timeliness of
reporting, and accuracy. Importantly, only recently has corporate governance become an
important issue for international companies. The OECD Web site says:
Corporate governance deals with the rights and the responsibilities of a company’s
management, its board, shareholders and various stakeholders. How well companies
are run affects market confidence as well as company performance. Good corporate
governance is therefore essential for companies that want access to capital and for
countries that want to stimulate private sector investment. If companies are well run,
they will prosper. This in turn will enable them to attract investors whose support can
help to finance faster growth. Poor corporate governance on the other hand weakens a
company’s potential and at worst can pave the way for financial difficulties and even
fraud (www.oecd.org).
