Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Question
Chapter 9, Problem 3P
To determine
Identify the transaction which clearly interprets the given scenario.
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During 2016 a U.S. firm sold inventory to a foreign customer. The transaction was denominated in the local
currency of the buyer. The direct exchange rate decreased from the date of the transaction to the end of
the fiscal period; the rate increased from the end of the fiscal period to the date of the account was settled
in 2017. A transaction gain or loss should be recognized
O a. 2016 0; 2017 0
Ob. 2016 gain; 2017 loss
O c 2016 loss; 2017 loss
O d. 2016 loss; 2017 gain
On October 1, 2020, Mud Co., a U.S. company, purchased parts from Terra, a Portuguese company, with payment due on December 1, 2020. If Mud's 2020 operating income included no foreign exchange gain or loss, the transaction could have _____.
A. Been denominated in U.S. dollars.
B. Generated a foreign exchange gain to be reported as a deferred charge on the balance sheet.
C. Resulted in an extraordinary gain.
D. Generated a foreign exchange loss to be reported as a separate component of stockholders' equity.
Turbo Corporation (a U.S.-based company) acquired merchandise on account from a foreign supplier on November 1, 2017, for 100,000 markkas. It paid the foreign currency account payable on January 17, 2018. The following exchange rates for 1 markka are known:a. How does the fluctuation in exchange rates affect Turbo’s 2017 income statement?b. How does the fluctuation in exchange rates affect Turbo’s 2018 income statement?
Chapter 9 Solutions
Advanced Accounting
Ch. 9 - Prob. 1QCh. 9 - Prob. 2QCh. 9 - What factors create a foreign exchange gain on a...Ch. 9 - In what way is the accounting for a foreign...Ch. 9 - Prob. 5QCh. 9 - How does a foreign currency option differ from a...Ch. 9 - Prob. 7QCh. 9 - Why would a company prefer a foreign currency...Ch. 9 - How do companies report foreign currency...Ch. 9 - How does a company determine the fair value of a...
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