cash, which produces a gain of $40 million. All negotiations occur and the sale contract i executed in Germany. Title to the stock pass to the purchaser in Ġermany, and the purchase price is paid in Germany. Modern Tool A.G. has been actively engaged in business in Germany and France for the last 10 years and has received approximately 60 percent of its gross income from France and 40 percent from Germany each vear. Is the
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- Leader Inc. has the following foreign financing: The company borrowed US$350,000, for five years, when US$1.00 = Cdn$1.02. The exchange rate at the end of the first year is US$1.00 = Cdn$1.03, and at the end of the second year is US$1.00 = Cdn$0.99. Assume the debt was raised at par. Ignore interest. Required: How much exchange gain or loss would be shown in earnings in the second year? (Do not round intermediate calculations.) Exchange Earnings in second year Gain LossOn October 1, 2024, Richmond Company sold inventory to a customer in a foreign country, denominated in 100,000 local currency units. Collection is expected in four months. On October 1, 2024, a forward exchange contract was acquired whereby Richmond was to pay 100,000 local currency units in four months (on February 1, 2025) and receive $86,000 in U.S. dollars. The spot and forward rates for the local currency units were as follows: Date Rate Description Exchange Rate October 1, 2024 Spot Rate $ 0.91 1 local currency unit December 31, 2024 Spot Rate $ 0.93 1 local currency unit February 1, 2025 1-Month Forward Rate Spot Rate $ 0.88 1 local currency unit $ 0.94 1 local currency unit Any discount or premium on the forward contract is amortized using the straight-line method. Required: Assuming this is a cash flow hedge, prepare journal entries for this sales transaction and forward contract.You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$. Information for Forward Contract: Forward exchange rate (one yr): 1.54 $/BP Information for Money Market Instruments (MMI): Current exchange rate: 1.50 $/BP Investment return at Aerion Fund Management (in UK): 4% annual Interest rate of borrowing from Bank of America (in USA): 2% annual Information you need for Currency Options Contract: Options premium: 0.015 $/BP Interest rate of borrowing from Bank of America (USA): 2% annual Allowed to exercise options at 1.54 $/BP What are the costs of MMI? (Answer in US$ of course. You are US company!) Group of answer choices None of the above $789,343 $735,504 $770,082 $783,452
- Voltac Corporation (a U.S.-based company) has the following import/export transactions denominated in Mexican pesos in 2020: Bought inventory costing 116,000 pesos on credit. March 1 May 1 August 1 September 1 Sold 60 percent of the inventory for 96,000 pesos on credit. Collected 78,000 pesos from customers. Paid 68,000 pesos to suppliers. Currency exchange rates for 1 peso for 2020 are as follows: Date March 1 May 1 August 1 September 1 December 31 Assume that all receipts were converted into dollars as soon as they were received. For each of the following accounts, what amount will Voltac report on its 2020 financial statements? a b C d Inventory Cost of goods sold Sales Accounts receivable U.S. Dollar per Peso $ 0.25 0.26 0.27 0.28 0.29 e Accounts payable f CashSteiner Co. recently established a subsidiary in Belarus. Given its immediate success, a rival company has offered Steiner Co. 10 million rubles to purchase the subsidiary today. The Belarusian ruble currently trades at $0.30, and Steiner internally forecasts the ruble to appreciate to $0.33 next year and $0.35 the following. If Steiner continues operating its subsidiary, the company expects to generate 5 million rubles in free cash next year and 10 million rubles the following. These cash flows would be remitted back to the parent in the U.S. at the end of the year in which they are earned. Steiner's required rate of return on similar projects is 20 percent. How much more/(less) would Steiner make by selling the company vs. running its subsidiary for the next two years? $805,556 O (-$327,270) O $1,111,111 O $908,750Stuff Inc., a U.S. company, imported goods for 50,000 euro on Dec. 10, Year 1 and paid for them on Jan. 10. Year 2. The following exchange rates were applicable in Years 1 and 2: Exchange Rate Date Dec. 10, Yr. 1 Dec 31, Yr 1 Jan 10, Yr. 2 What approximate gain or loss will Stuff book on Jan. 10, Year 2? OA gain of $3,000. OA loss of $3,000 O Again of $5,500 OA loss of $5,500. 0.79 € 0.82 € 0.75 €
- A. Suppose, Company ABC is U.S. based company and has a British subsidiary. It is expected that the subsidiary will send 10 million pounds in two months to the Company. Thus, Company ABC is concerned that in the next two months the pound will depreciate in value. i) A Firm buys an FRA on 90-day LIBOR expiring in 30 days with Notional principal of $20 million. The contract rate is 10%. If at expiration, LIBOR is 8%, how much will the long has to pay to the short i.e., seller of FRA. What happens if at expiration, LIBOR is 12%?Spindler, Inc. (a U.S.-based company), imports surfboards from a supplier in Brazil and sells them in the United States. Purchases are denominated in terms of the Brazilian real (BRL). During 2020, Spindler acquires 420 surfboards at a price of BRL 1,600 per surfboard, for a total of BRL 672,000.00. Spindler will pay for the surfboards when it sells them. Relevant exchange rates are as follows: Date U.S. Dollar perBrazilian Real (BRL) September 1, 2020 $ 0.230 December 1, 2020 0.220 December 31, 2020 0.240 March 1, 2021 0.225 Assume that Spindler acquired the surfboards on September 1, 2020, and made payment on December 1, 2020. What is the effect of the exchange rate fluctuations on reported income in 2020? Assume that Spindler acquired the surfboards on December 1, 2020, and made payment on March 1, 2021. What is the effect of the exchange rate fluctuations on reported income in 2020 and 2021? Assume that Spindler acquired the surfboards on…Royal Company (a U.S. based company) has foreign branch in Great Britain. The foreign branch generates £5,000,000 pretax income. October 15, branch sends £1,000,000 to Royal. Income tax rate in Great Britain is 15%. Taxes are paid to Great Britain’s government on December 31. Assume a tax rate of 21% in the U.S. Here are relevant exchange rates: US$ to £ 1/1 $1.2 10/15 $1.3 12/31 $1.4 Average $1.35 Determine the amount (in U.S. dollars) of U.S. taxable income, U.S. foreign tax credit, and U.S. tax liability related to the foreign branch.
- On January 1, 2024, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2024 financial statements stated in Swiss francs are given below. GRANT MANAGEMENT CONSULTANTS Comparative Balance Sheets January 1 and December 31, 2024 Direct exchange rates for Swiss franc are: Required: A. Translate the year-end balance sheet and income statement of foreign subsidiary using the current rate method of translation. B. Prepare a schedule to verify the translation adjustment. Cash and Receivables Net Property, Plant, and Equipment 40,000 37,000 60,000 92,000 30,000 32,000 20,000 20,000 10,000 40,000 60,000 92,000 Totals Accounts and Notes Payable Common Stock Retained Earnings Totals GRANT MANAGEMENT CONSULTANTS Consolidated Income and Retained Earnings Statement for the Year Ended December 31, 2024 Jan. 1 Dec. 31 20,000 55,000 Revenues 75,000 Operating…A U.S.-based multinational company has two subsidiaries, one in Mexico (local currency, Mexicanpeso, MP) and one in Japan (local currency, yen, ¥). Forecasts of business operations indicate the following short-term financing position for each subsidiary (in equivalent U.S. dollars): Mexico:$80 million excess cash to be invested (lent) Japan: $60 million funds to be raised (borrowed) Currency Item US $ MP ¥ Spot exchange rates MP11.60/US$ ¥108.25/US$ Forecast percentage change −3.00% +1.50% Interest rates Nominal Euromarket 4.00% 6.20% 2.00% Domestic 3.75% 5.90% 2.15% Effective Euromarket Domestic Euromarket and the domestic market; then indicate where the funds should be invested and raised.…A company manufactures a product in the United States and sells it in England. The unit cost of manufacturing is $52. The current exchange rate (dollars per pound) is 1.213. The demand function, which indicates how many units the company can sell in England as a function of price (in pounds) is of the power type, with constant 27556733 and exponent -2.5. A) Develop a model for the company's profit (in dollars) as a function of the price it charges (in pounds). Then use a data table to find the profit-maximizing price to the nearest pound. Assume that the price ranges from £45 to £100 in increments of £1. Round your answer for the maximum profit to the nearest dollar and your answer for the best price to the nearest pound. 1. Maximum profit: $______ 2. Best price: £ ______