CONNECT ONLINE ACCESS FOR FUNDAMENTAL AC
25th Edition
ISBN: 9781266064173
Author: Wild
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 15A, Problem 12DQ
To determine
Concept Introduction:
Foreign Exchange Rate: It refers to the price of one currency which is expressed in terms of the currency of another country. In other words, the foreign exchange rate is the rate at which the currency of two countries is exchanged.
The exchange gain or loss as per country U’s company record.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
If a U.S. company makes a credit sale to a foreign customer required to make payment in U.S. dollars, can the U.S. company have an exchange gain or loss on this sale?
Assume that a U.S. company has a foreign subsidiary whose functional currency is the U.S. dollar. Explain how exchange rates between the foreign currency and the dollar would have to change in order to result in a current-year remeasurement loss and how the company could use a foreign currency loan receivable or payable to hedge against its net investment in the foreign subsidiary.
Assume that a German corporation exports electronic equipment to USA in a transaction denominated in dollar. Is this transaction a foreign currency transaction? Is it a foreign transaction? Explain the difference between these two concepts and their application here.
Chapter 15A Solutions
CONNECT ONLINE ACCESS FOR FUNDAMENTAL AC
Knowledge Booster
Similar questions
- Shore Co. records its transactions in U.S. dollars. A sale of goods resulted in a receivable denominated in Japanese yen, and a purchase of goods resulted in a payable denominated in euros. Shore recorded a foreign exchange gain on collection of the receivable and an exchange loss on settlement of the payable. The exchange rates are expressed as so many units of foreign currency to one dollar. Did the number of foreign currency units exchangeable for a dollar increase or decrease between the contract and settlement dates? Ο Α. O Yen Euros exchangeable exchangeable for $1 for $1 Increase Increase B. Decrease Decrease C. D. Increase Decrease Increase Decreasearrow_forwardWhich of the following items will result to foreign currency transaction gain/loss due to settlement or remeasurement? Foreign currency denominated non-monetary liabilities such as unearned revenue, warranty liability, premium liability and deferred tax liability. Foreign currency denominated non-monetary assets such as inventory, PPE, intangible asset or prepaid asset. Foreign currency denominated monetary items such as accounts payable, accounts receivable, notes payable, loans receivable or interest payable. Foreign currency denominated income statement accounts such as revenue, income, expense or loss.arrow_forwardWhen exchange rates are quoted as the number of U.S. dollars per unit of foreign currency, it is referred to as a . European terms b . American terms c . spot-market terms d . fixed-exchange termsarrow_forward
- A U.S. company purchases inventory from a foreign vendor, and purchases are denominated in the foreign currency (FC). The U.S. dollar is expected to weaken against the FC. Explain how a forward contract might be employed as a hedge against exchange rate risk.arrow_forwardRush records its transactions in U.S. dollars. A purchase of goods resulted in a payable denominated in UK pounds, and a sale of goods resulted in a receivable denominated in Euros. Rush recorded a foreign exchange transaction gain on settlement of the UK pound payable and an exchange transaction gain on the collection of the Euros receivable. Did the US dollar weaken or strengthen against those respective currencies? US dollar against the UK Pound US dollar against the Euro weakened А. weakened strengthened weakened В. weakened strengthened strengthened D. strengthenedarrow_forwardAssume that a U.S. company has made three purchases of inventory from three different foreign vendors. One of the purchases is denominated in U.S. dollars, and the other two purchases are denominated in foreign currency, FC-A and FC-B, respectively. Furthermore, between the time of the purchase and payment to the vendor, the U.S. dollar has strengthened relative to FC-A and weakened relative to FC-B.Discuss how exchange rate changes would impact each of the three purchases.arrow_forward
- Discuss the accounting treatment for foreign currency transactions. How do changes in exchange rates affect a company's financial statements?arrow_forwardDiscussarrow_forwardQuestion: When accounting for foreign exchange transactions, which of the following statements accurately describes the use of the "Temporal Method" under the International Financial Reporting Standards (IFRS)? A) The Temporal Method is used to account for foreign exchange gains and losses on monetary assets and liabilities at the historical exchange rate. B) The Temporal Method is used to account for foreign exchange gains and losses on monetary assets and liabilities at the current exchange rate. C) The Temporal Method is used to account for foreign exchange gains and losses on non-monetary assets and liabilities at the historical exchange rate. D) The Temporal Method is used to account for foreign exchange gains and losses on non-monetary assets and liabilities at the current exchange rate.arrow_forward
- The exchange loss/gain due to a transaction exposure is estimated while O a. Converting a foreign currency into a domestic currency O b. Quoting a price for a foreign currency transaction O c. Entering into a transaction in foreign exchange O d. Verifying the fluctuation in the exchange ratearrow_forwardA Eurodollar deposit is.. a) a deposit denominated in euros at a US bank b) a deposit denominated in dollars at a bank "outside" the US c) a deposit denominated in dollars in the US by a European company d) an agreement to exchange euros for dollars at a specific exchange rate e) a deposit issued by banks in order to make loans to Europeansarrow_forwardAverage exchange rates are used to translate certain items from foreign income statements into U.S. dollars. Such averages are used to: a. Avoid using different exchange rates for some revenue and expense accounts b. Smooth out large exchange gains and losses c. Eliminate large and temporary fluctuations in exchange rates that may reverse in the near future d. Approximate the effects of using the current exchange rates in effect on the transaction datesarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
