ACC 501 Latest Test Questions with Complete
Solutions
The forward contract entered into on December 1 is an example of
b. A hedge of a foreign currency commitment - ans
The entry to record the forward contract is
FCU Receivable 42,600
Dollars Payable 42,600
On December 31, what will be the adjusted balance in the Accounts Payable account and
how much gain or loss was recorded as a result of the adjustment?
43,200 payable & 1,800 loss
What amount of net transaction gain or loss from the transactions should be included in
thedetermination of the 2014 net income?
1,800 loss
Which of the following statements is not true?
Assuming the account payable is to be settled on February 1, Tuscano Corp. was ableto reduce
its cash outflow for the purchases as a result of entering into the forward contract
On December 1, 2014, SMC entered into a transaction to import raw materials froma
foreign country. The account is to be settled March 1 with the payment of 50,000euros. The
spot rate for euros on December 1 was $1.4/euro and on March 1 was$1.44/euro. If SMC
does not hedge the payable, raw materials will be recorded onthe books on March 1, 2015
at what amount?
, 70k
On December 1, 2014, SMC entered into a transaction to import raw materials froma
foreign country. The account is to be settled March 1 with the payment of 50,000euros. The
spot rates and the forward rates on various dates are as follows:
Spot RateForward RateDate$ per euro(March 1 Settlement)Dec. 1$1.00$1.03March
1$1.04$1.04
To hedge the company's accounts payable position, SMC should:
Buy a forward contract to purchase 50,000 euros on March 1
hen translating foreign currency financial statements for an entity whose functional
currency is thelocal currency of the country in which it is physically located, which of the
following accounts istranslated using current exchange rates?
Bonds payable - yes inventories - yes
A translation adjustment (or translation gain) that is a consequence of translation of a
functionalcurrency that is different from the reporting currency should be
Included in net income in the period in which it occur
When the foreign operations are conducted in a highly inflationary economy, at what
translation ratesshould the goodwill and accounts receivable accounts in foreign statements
be translated into U.S. dollars?
Historical and current
Pal Company is translating account balances of its foreign subsidiary into dollars for its
December 31,2014, balance sheet and its 2014 income statement. The functional currency
Solutions
The forward contract entered into on December 1 is an example of
b. A hedge of a foreign currency commitment - ans
The entry to record the forward contract is
FCU Receivable 42,600
Dollars Payable 42,600
On December 31, what will be the adjusted balance in the Accounts Payable account and
how much gain or loss was recorded as a result of the adjustment?
43,200 payable & 1,800 loss
What amount of net transaction gain or loss from the transactions should be included in
thedetermination of the 2014 net income?
1,800 loss
Which of the following statements is not true?
Assuming the account payable is to be settled on February 1, Tuscano Corp. was ableto reduce
its cash outflow for the purchases as a result of entering into the forward contract
On December 1, 2014, SMC entered into a transaction to import raw materials froma
foreign country. The account is to be settled March 1 with the payment of 50,000euros. The
spot rate for euros on December 1 was $1.4/euro and on March 1 was$1.44/euro. If SMC
does not hedge the payable, raw materials will be recorded onthe books on March 1, 2015
at what amount?
, 70k
On December 1, 2014, SMC entered into a transaction to import raw materials froma
foreign country. The account is to be settled March 1 with the payment of 50,000euros. The
spot rates and the forward rates on various dates are as follows:
Spot RateForward RateDate$ per euro(March 1 Settlement)Dec. 1$1.00$1.03March
1$1.04$1.04
To hedge the company's accounts payable position, SMC should:
Buy a forward contract to purchase 50,000 euros on March 1
hen translating foreign currency financial statements for an entity whose functional
currency is thelocal currency of the country in which it is physically located, which of the
following accounts istranslated using current exchange rates?
Bonds payable - yes inventories - yes
A translation adjustment (or translation gain) that is a consequence of translation of a
functionalcurrency that is different from the reporting currency should be
Included in net income in the period in which it occur
When the foreign operations are conducted in a highly inflationary economy, at what
translation ratesshould the goodwill and accounts receivable accounts in foreign statements
be translated into U.S. dollars?
Historical and current
Pal Company is translating account balances of its foreign subsidiary into dollars for its
December 31,2014, balance sheet and its 2014 income statement. The functional currency
