A U.S. company's foreign subsidiary had these amounts in local currency units (LCU) in 2024:Cost of goods soldBeginning inventoryEnding inventoryLCU 5,590,000501,000604,000The average exchange rate during 2024 was $1.50 = LCU 1. The beginning inventory was acquired when the exchange rate was $1.30=LCU 1. Ending inventory was acquired when the exchange rate was $1.60 = LCU 1. The exchange rate on December 31, 2024, was$1.65 =LCU 1.Required:Assuming that the foreign country is highly inflationary, determine the amount at which the foreign subsidiary's cost of goods soldshould be reflected in the U.S. dollar income statement.Cost of goods sold

1. Calculate the cost of goods sold in local currency units (LCU) using the average exchange…

Answered: A U.S. company's foreign subsidiary had…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cedar Co., a U.S. corporation, sold inventory on December 1, 2023, with payment of 12,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: Date December 1, 2023 December 31, 2023 January 30, 2024 O $0 Spot Rate (U.S. Dollar per British pound) O $756 loss O $1,740 gain O $2,496 loss $1.831 $1.976 What amount of foreign exchange transaction gain or loss should be recorded on January 30, 2024? $1.768
Icebreaker Company (a U.S. -based company) purchases materials from a foreign supplier on December 1, 2023, with payment of 20,000 dinars to be made on March 1, 2024. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2023, Icebreaker enters into a forward contract to purchase 20,000 dinars on March 1, 2024. Relevant exchange rates for the dinar on various dates are as follows: Required: a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. a-2. What is the impact on 2023 net income? a-3. What is the impact on 2024 net income? a-4. What is the impact on net income over the two accounting periods? b-1. Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for the import purchase and…
Company X is a U.S.-based IT company with operations and earnings in a number of foreign countries. The company's profits by subsidiary, in local currency (in millions), are shown in the following table for 2019 and 2020. Net Income Japanese Subsidiary Britih Subsidiary 2019 JPY 200 GBP 100.00 2020 JPY 1,480 GBP 108.40 The average exchange rate for each year, by currency pairs, is the following. Exchange Rate USD = 1 GBP JPY = 1 USD 2019 97.57 1.5646 2020 90.88 1.6473 Use the above data, Students answer the following questions. a. What is Company X's consolidated profits in U.S. dollars in 2019 and 2020? b. If the same exchange rates are used for both years, what is the change in corporate earnings on a "constant currency" basis? c. Using the results of the constant currency analysis in part b, is it possible to separate Company X's growth in earnings between local currency earnings and foreign exchange rate impacts on a consolidated basis?
Brandt Corp. (a U.S.-based company) sold parts to a South Korean customer on December 1, 2020, with payment of 10 million South Korean won to be received on March 31, 2021. The following exchange rates apply: Date Spot Rate Forward Rate(to March 31, 2021) December 1, 2020 $ 0.0035 $ 0.0034 December 31, 2020 0.0033 0.0032 March 31, 2021 0.0038 N/A 1. Assuming that Brandt did not hedge his foreign exchange risk, how much foreign exchange gain or loss should it report on its 2020 income statement with regard to this transaction? a. 3000 gain b. 2000 loss c. 5000 gain d. 1000 loss 2. Assuming that Brandt entered into a forward contract to sell 10 million South Korean won on December 1, 2020, as a fair value hedge of a foreign currency receivable, what is the net impact on its net income in 2020 resulting from a fluctuation in the value of the won? Brandt amortizes forward points on a monthly basis using a straight-line method. Ignore…
The following are the foreign currency positions of an FI, expressed in the foreign currency: Currency Assets Liabilities FX Bought FX Sold Swiss franc (Sf) Sf 132,600 Sf 54,570 Sf 12,750 Sf 17,850 British pound (£) £ 42,500 £ 21,500 £ 15,500 £ 22,000 Japanese yen (¥) ¥ 8,200,000 ¥ 3,500,000 ¥ 1,600,000 ¥ 9,100,000 The exchange rate of dollars for Sf is 1.02, of dollars for British pound is 1.31, and of dollars for yen is .00953.The following are the foreign currency positions converted to dollars: Currency Assets Liabilities FX Bought FX Sold Swiss franc (Sf) $ 130,000 $ 53,500 $ 12,500 $ 17,500 British pound (£) $ 55,675 $ 28,165 $ 20,305 $ 28,820 Japanese yen (¥) $ 78,146 $ 33,355 $ 15,248 $ 86,723 a. What is the FI’s net exposure in Swiss francs stated in Swiss francs (Sf) and in dollars ($)?b. What is the FI’s net exposure in British pounds stated in British pounds (£) and in…
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1) The following table contains exchange rate data for five countries: Country Big Mac Actual Price in Exchange Big Mac Price in $ Implied PPP of $ Over/under valuation (%) Local Rate Currency U.S. $3.20 $1.00/$ Norway K30.00 K10.25/$ Sweden K28.75 K10.10/$ Finland €2.85 €0.95/$ Iceland K410 K145/$ a) Compute the Big Mac price (in dollars) in each country. b) Compute the PPP-implied exchange rate for each currency. c) Compute the percentage over/undervaluation for each currency.
A3
Dd5.
Use the following information on the U.S. dollar value of the euro to answer the question. Forward Rate for Spot Rate April 30, 2024 Delivery $1.130 $1,140 October 20, 2023 November 1, 2023 December 31, 2023 April 30, 2024 Select one: 1.148 1.100 1.170 On October 30, 2023, a US company receives a purchase order from a customer in Spain. Under the sale terms, the customer will pay the company €100.000 on April 30; 2024 On October 30, the US company also enters a forward contract to sell €100,000 on April 30, 2024. The company delivers the merchandise to the customer on November 1, On April 30, the company receives €100,000 from the customer and sells it using the forward contract. The company's accounting year ends December 31. What net gain or loss is recognized in 2023, in addition to sales revenue? esc a $500 net loss b. 1800 net gain, c. $800 net loss d. $500 net gain 3.145 1165 1.170 * 8: MacBook Air & FL 40 # 6-41 16 W 19 F M m
Foreign currency transactions Melbourne Ltd purchased goods from France on 3 April 2022 on credit shipped FOB Paris. The cost of good is Euro 500,000 and outstanding as of 31 April 2021. On 3 April 2022, the exchange rate is A$1.00 = Euro 0.67. On 30 April 2022, exchange rate is A$1.00 = Euro 0.66 REQUIRED Provide the accounting entries necessary to account for the above purchase transaction for the month ending 30 April 2022.
1 points Clark Company, a U.S. corporation, sold inventory on December 1, 2022, with payment of 12,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: Date December 1 December 31 January 30 0000 Spot Rate $1.831 $1.976 $1.768 What amount of foreign exchange gain or loss should be recorded on December 317 $1,740 gain $1,740 loss $756 loss $756 gain

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