Question 25Chicago based Corporation X has a number of importing transactions with companies based in UK. Importing activities result in payables. If the settlement currency is the British Pound, which of the following will happen by changes in the direct or indirect exchange rates? Direct Exchange RateIndirect Exchange RateIncreasesDecreasesIncreasesDecreasesNANANANA Direct Exchange RateIndirect Exchange RateIncreasesDecreasesIncreasesDecreasesLossGainGainLoss Direct Exchange RateIndirect Exchange RateIncreasesDecreasesIncreasesDecreasesLossGainNANA Direct Exchange RateIndirect Exchange RateIncreasesDecreasesIncreasesDecreasesGainLossLossGain

Introduction:- First we need to understand the given question Chicago based Corporation X has a number of importing transactions with companies based in UK. Importing activities result in payables. If the settlement currency is the British Pound the following will happen by changes in the direct or indirect exchange rates as follows:-Explanation:- Chicago Based Company X needs to pay in British Pounds when Direct Exchange rate increases it leads to loss. For examples:- US dollar to pound is 9.0 Pounds per dollar if Pound Increases to 9.05 then X Company need to pay more than regular rate of 0.05 pounds which leads to loss. In case of direct exchange rate is decreases leads to gain vice-versa to Indirect Exchange rate.Conclusion:- As per the above discussions option "b" is the correct answer, which satisfies the given requirement and remaining options do not satisfies the given requirement... I hope helpful to you.. If you are satisfied.. Support me.. Thank you..

Answered: Chicago based Corporation X has a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Question 25

Chicago based Corporation X has a number of importing transactions with companies based in UK. Importing activities result in payables. If the settlement currency is the British Pound, which of the following will happen by changes in the direct or indirect exchange rates?