On December 1, 2014, SMC entered into a transaction to import raw materials from a foreign country. The account is to be settled March 1 with the payment of 50,000 euros. The spot rate for euros on December 1 was $1.4/euro and on March 1 was $1.44/euro. If SMC does not hedge the payable, raw materials will be recorded on the books on March 1, 2015 at what amount? a. $70,000 b. none of these c. $72,000 d. 50,000 euros

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Question
Problem solve with calculation
On December 1, 2014, SMC entered into a transaction to
import raw materials from a foreign country. The account
is to be settled March 1 with the payment of 50,000 euros.
The spot rate for euros on December 1 was $1.4/euro and
on March 1 was $1.44/euro. If SMC does not hedge the
payable, raw materials will be recorded on the books on
March 1, 2015 at what amount?
a. $70,000
b. none of these
c. $72,000
d. 50,000 euros
Transcribed Image Text:On December 1, 2014, SMC entered into a transaction to import raw materials from a foreign country. The account is to be settled March 1 with the payment of 50,000 euros. The spot rate for euros on December 1 was $1.4/euro and on March 1 was $1.44/euro. If SMC does not hedge the payable, raw materials will be recorded on the books on March 1, 2015 at what amount? a. $70,000 b. none of these c. $72,000 d. 50,000 euros
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