ADV.FIN.ACCT.LL W/CONNECT+PROCTORIO PLUS
12th Edition
ISBN: 9781266380570
Author: Christensen
Publisher: MCG
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Question
Chapter 11, Problem 11.19.2E
To determine
Introduction: Foreign exchange contractis the contract between the parties which agrees to transfer the amount of foreign exchange at a predetermined rate of exchange on predetermined date.
To choose:The correct option.
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[The following information applies to the questions displayed below.]
Select the correct answer for each of the following questions.
Note: Items 3 through 5 are based on the following:
On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows:
Spot Rate
Forward Rate for March 12, 20X6
December 12, 20X5
$ 0.88
$ 0.90
December 31, 20X5
0.98
0.93
2. On September 1, 20X5, Johnson Incorporated entered into a foreign exchange contract for speculative purposes by purchasing €50,000 for delivery in 60 days. The rates to exchange U.S. dollars for euros follow:
9/1/X5
9/30/X5
Spot rates
$ 0.75
$ 0.70
30-day forward rate
0.73
0.72
60-day forward rate
0.74
0.73
In its September 30, 20X5, income statement, what amount should Johnson report as foreign exchange loss?
multiple choice
$2,500
$500
$1,500
$1,000
(b) White Cliffs Co, whose year-end is 31 December, buys some goods from Rinka SA of
France on 30 September. The invoice value is €40,000 and is due for settlement in equal
instalments on 30 November and 31 January. The exchange rate moved as follows.
€ to $1
|30 September
30 November
1.60
| 1.80
31 December
31 January
1.90
1.85
Required
State the accounting entries in the books of White Cliffs Co.
1.
On September 1, 20X1, Cano & Company, a U.S. corporation, sold merchandise to a foreign firm for 250,000 euros. Terms of the sale require payment in euros on February 1, 20X2. On September 1, 20X1, the spot exchange rate was $1.30 per euro. At Cano’s year-end on December 31, 20X1, the spot rate was $1.28, but the rate increased to $1.33 by February 1, 20X2, when payment was received.
Required:
What foreign currency transaction gain or loss should be recorded in 20X1?
What foreign currency transaction gain or loss should be recorded in 20X2?
Amount
Gain / Loss
1.
Foreign currency transaction gain (loss) 20X1
2.
Foreign currency transaction gain (loss) - 20X2
Chapter 11 Solutions
ADV.FIN.ACCT.LL W/CONNECT+PROCTORIO PLUS
Ch. 11 - Prob. 11.1QCh. 11 - Prob. 11.2QCh. 11 - The U.S. dollar strengthened against the European...Ch. 11 - Prob. 11.4QCh. 11 - Prob. 11.5QCh. 11 - How are assets and liabilities denominated in a...Ch. 11 - Prob. 11.7QCh. 11 - Prob. 11.8QCh. 11 - Prob. 11.9QCh. 11 - Distinguish between an exposed net asset position...
Ch. 11 - Prob. 11.11QCh. 11 - Prob. 11.12QCh. 11 - Effects of Changing Exchange Rates Analysis Since...Ch. 11 - Prob. 11.2CCh. 11 - Prob. 11.5CCh. 11 - Prob. 11.1ECh. 11 - Prob. 11.2ECh. 11 - Basic Understanding of Foreign Exposure The...Ch. 11 - Prob. 11.5ECh. 11 - Prob. 11.6ECh. 11 - Prob. 11.7ECh. 11 - Adjusting Entries for Foreign Currency Balances...Ch. 11 - Prob. 11.9ECh. 11 - Prob. 11.10ECh. 11 - Prob. 11.11.1ECh. 11 - Prob. 11.11.2ECh. 11 - Prob. 11.11.3ECh. 11 - Prob. 11.11.4ECh. 11 - Prob. 11.11.5ECh. 11 - Prob. 11.11.6ECh. 11 - Prob. 11.11.7ECh. 11 - Prob. 11.12ECh. 11 - Prob. 11.13ECh. 11 - Prob. 11.14.1ECh. 11 - Foreign Currency Transactions [AICPA Adapted]...Ch. 11 - Prob. 11.14.3ECh. 11 - Prob. 11.14.4ECh. 11 - Prob. 11.14.5ECh. 11 - Foreign Currency Transactions [AICPA Adapted]...Ch. 11 - Prob. 11.14.7ECh. 11 - Prob. 11.15ECh. 11 - Prob. 11.16AECh. 11 - Prob. 11.17ECh. 11 - Prob. 11.18ECh. 11 - Prob. 11.19.1ECh. 11 - Prob. 11.19.2ECh. 11 - Prob. 11.19.3ECh. 11 - Prob. 11.19.4ECh. 11 - Prob. 11.19.5ECh. 11 - Prob. 11.20.1PCh. 11 - Prob. 11.20.2PCh. 11 - Prob. 11.20.3PCh. 11 - Prob. 11.20.4PCh. 11 - Prob. 11.20.5PCh. 11 - Foreign Sales Tex Hardware sells many of its...Ch. 11 - Prob. 11.22PCh. 11 - Prob. 11.23.1PCh. 11 - Prob. 11.23.2PCh. 11 - Prob. 11.24PCh. 11 - Prob. 11.25PCh. 11 - Prob. 11.26PCh. 11 - Prob. 11.27.1PCh. 11 - Prob. 11.27.2PCh. 11 - Prob. 11.27.3PCh. 11 - Prob. 11.28APCh. 11 - Prob. 11.29.1BPCh. 11 - Prob. 11.29.2BPCh. 11 - Prob. 11.29.3BPCh. 11 - Prob. 11.29.4BPCh. 11 - Prob. 11.29.5BPCh. 11 - Prob. 11.29.6BPCh. 11 - Prob. 11.30BPCh. 11 - Prob. 11.31BPCh. 11 - Matching Key Terms Match the items in the lefthand...
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