Advanced Financial Accounting Final MC
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1. Dale Inc., a U.S. company, bought machine parts from a German company
on March 1, 20X1, for €30,000, when the spot rate for euros was $0.4895. Dale's
year-end was March 31, when the spot rate was $0.4845. On April 20, 20X1,
Dale paid the liability with €30,000 acquired at a rate of $0.4945. *Dale's income
statements should report a foreign exchange gain or loss for the years ended
March 31, 20X1 and 20X2 of*: 20X1: $150 Gain
20X2: $300 Loss
2. Marvin Company's receivable from a foreign customer is denominated in
the customer's local currency. This receivable of 900,000 LCUs has been
translated into $315,000 on Marvin's December 31, 20X5, balance sheet. On
January 15, 20X6, the receivable was collected in full when the exchange
rate was 3 LCU to $1. *The journal entry Marvin should make to record the
collection of this receivable is*: DR Foreign Currency Units 300,000
DR Exchange loss 15000
CR A/R 315,000
3. On July 1, 20X1, Black Company lent $120,000 to a foreign supplier, evi-
denced by an interest-bearing note due on July 1, 20X2. The note is denomi-
nated in the borrower's currency and was equivalent to 840,000 LCUs on the
loan date. The note principal was appropriately included at $140,000 in the
receivables section of Black's December 31, 20X1, balance sheet. The note
principal was repaid to Black on the July 1, 20X2, due date when the exchange
rate was 8 LCUs to $1. In its income statement for the year ended December
31, 20X2, *what amount should Black include as a foreign currency transaction
gain or loss on the note principal?*: $35,000 loss
4. If 1 Canadian dollar can be exchanged for 90 cents of U.S. currency, *what
fraction should be used* to compute the indirect quotation of the exchange
rate expressed in Canadian dollars?: 1/.90
5. On July 1, 20X4, Bay Company borrowed 1,680,000 local currency units
(LCUs) from a foreign lender evidenced by an interest-bearing note due on
July 1, 20X5, which is denominated in the currency of the lender. The U.S. dollar
equivalent of the note principal was as follows:
7/1/X4 (date borrowed)$210,000 12/31/X4 (Bay's year-end) 240,000 7/1/X5 (date
repaid) 280,000
*In its income statement for 20X5, what amount should Bay include as a
foreign exchange gain or loss on the note principal?*: $40,000 loss
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6. An entity denominated a sale of goods in a currency other than its functional
currency. The sale resulted in a receivable fixed in terms of the amount of
foreign currency to be received. The exchange rate between the functional cur-
rency and the currency in which the transaction was denominated changed.
*The effect of the change should be included as a*: Component of income
whether the change results in a gain or loss
7. An entity denominated a December 15, 20X6, purchase of goods in a cur-
rency other than its functional currency. The transaction resulted in a payable
fixed in terms of the amount of foreign currency and was paid on the settle-
ment date, January 20, 20X7. *The exchange rates between the functional cur-
rency and the currency in which the transaction was denominated changed at
December 31, 20X6, resulting in a loss that should*: Be included as a component
of income from continuing operations for 20X6
8. On November 15, 20X3, Chow Inc., a U.S. company, ordered merchandise
FOB shipping point from a German company for €200,000. The merchandise
was shipped and invoiced on December 10, 20X3. Chow paid the invoice on
January 10, 20X4. The spot rates for euros on the respective dates were
November 15, 20X3 $0.4955 December 10, 20X3 0.4875 December 31, 20X3
0.4675
January 10, 20X4 0.4475
*In Chow's December 31, 20X3, income statement, the foreign exchange gain
is*: $4,000
9. Stees Corporation had the following foreign currency transactions during
20X2. First, it purchased merchandise from a foreign supplier on January 20,
20X2, for the U.S. dollar equivalent of $90,000. The invoice was paid on March
20, 20X2, at the U.S. dollar equivalent of $96,000. Second, on July 1, 20X2,
Stees borrowed the U.S. dollar equivalent of $500,000 evidenced by a note that
was payable in the lender's local currency on July 1, 20X4. On December 31,
20X2, the U.S. dollar equivalents of the principal amount and accrued interest
were $520,000 and $26,000, respectively. Interest on the note is 10 percent per
annum. In Stees's 20X2 income statement, *what amount should be included
as a foreign exchange loss?*: $27,000
10. On September 1, 20X1, Cott Corporation received an order for equipment
from a foreign customer for 300,000 LCUs when the U.S. dollar equivalent
was $96,000. Cott shipped the equipment on October 15, 20X1, and billed the
customer for 300,000 LCUs when the U.S. dollar equivalent was $100,000. Cott
received the customer's remittance in full on November 16, 20X1, and sold
, Advanced Financial Accounting Final MC
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the 300,000 LCUs for $105,000. In its income statement for the year ended
December 31, 20X1, *Cott should report a foreign exchange gain of*: $5,000
11. On April 8, 20X3, Trul Corporation purchased merchandise from an unaffili-
ated foreign company for 10,000 units of the foreign company's local currency.
Trul paid the bill in full on March 1, 20X4, when the spot rate was $0.45. The
spot rate was $0.60 on April 8, 20X3, and was $0.55 on December 31, 20X3.
For the year ended December 31, 20X4, *Trul should report a transaction gain
of*: $1,000
12. On October 1, 20X5, Stevens Company, a U.S. company, contracted to
purchase foreign goods requiring payment in pesos one month after their
receipt in Stevens's factory. Title to the goods passed on December 15, 20X5.
The goods were still in transit on December 31, 20X5. Exchange rates were 1
dollar to 22 pesos, 20 pesos, and 21 pesos on October 1, December 15, and
December 31, 20X5, respectively. *Stevens should account for the exchange
rate fluctuations in 20X5 as*: A gain included in income before discontinued
operations.
13. On October 2, 20X5, Louis Co., a U.S. company, purchased machinery from
Stroup, a German company, with payment due on April 1, 20X6. If Louis's 20X5
operating income included no foreign exchange gain or loss, *the transaction
could have*: Been denominated in U.S. dollars.
14. Cobb Co. purchased merchandise for 300,000 pounds from a vendor in
London on November 30, 20X5. Payment in British pounds (£) was due on
January 30, 20X6. The exchange rates to purchase 1 pound were as follows:
Spot rates: November $1.65, December $1.62
30-day rate: November 1.64, December 1.59
60-day rate: November 1.63, December 1.56
*In its December 31, 20X5, income statement, what amount should Cobb report
as a foreign exchange gain?*: $9,000
15. Certain balance sheet accounts in a foreign subsidiary of Shaw Company
on December 31, 20X1, have been restated in U.S. dollars as follows:
*Accounts Receivable, Current* (Current rate = $100,000) (Historical rate =
$110,000)
*Accounts Receivable, Long-Term* (C=50,000) (H=55,000)
*Prepaid Insurance* (C=25,000) (H=30,000)
*Patents* (C=40,000) (H=45,000)
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1. Dale Inc., a U.S. company, bought machine parts from a German company
on March 1, 20X1, for €30,000, when the spot rate for euros was $0.4895. Dale's
year-end was March 31, when the spot rate was $0.4845. On April 20, 20X1,
Dale paid the liability with €30,000 acquired at a rate of $0.4945. *Dale's income
statements should report a foreign exchange gain or loss for the years ended
March 31, 20X1 and 20X2 of*: 20X1: $150 Gain
20X2: $300 Loss
2. Marvin Company's receivable from a foreign customer is denominated in
the customer's local currency. This receivable of 900,000 LCUs has been
translated into $315,000 on Marvin's December 31, 20X5, balance sheet. On
January 15, 20X6, the receivable was collected in full when the exchange
rate was 3 LCU to $1. *The journal entry Marvin should make to record the
collection of this receivable is*: DR Foreign Currency Units 300,000
DR Exchange loss 15000
CR A/R 315,000
3. On July 1, 20X1, Black Company lent $120,000 to a foreign supplier, evi-
denced by an interest-bearing note due on July 1, 20X2. The note is denomi-
nated in the borrower's currency and was equivalent to 840,000 LCUs on the
loan date. The note principal was appropriately included at $140,000 in the
receivables section of Black's December 31, 20X1, balance sheet. The note
principal was repaid to Black on the July 1, 20X2, due date when the exchange
rate was 8 LCUs to $1. In its income statement for the year ended December
31, 20X2, *what amount should Black include as a foreign currency transaction
gain or loss on the note principal?*: $35,000 loss
4. If 1 Canadian dollar can be exchanged for 90 cents of U.S. currency, *what
fraction should be used* to compute the indirect quotation of the exchange
rate expressed in Canadian dollars?: 1/.90
5. On July 1, 20X4, Bay Company borrowed 1,680,000 local currency units
(LCUs) from a foreign lender evidenced by an interest-bearing note due on
July 1, 20X5, which is denominated in the currency of the lender. The U.S. dollar
equivalent of the note principal was as follows:
7/1/X4 (date borrowed)$210,000 12/31/X4 (Bay's year-end) 240,000 7/1/X5 (date
repaid) 280,000
*In its income statement for 20X5, what amount should Bay include as a
foreign exchange gain or loss on the note principal?*: $40,000 loss
, Advanced Financial Accounting Final MC
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6. An entity denominated a sale of goods in a currency other than its functional
currency. The sale resulted in a receivable fixed in terms of the amount of
foreign currency to be received. The exchange rate between the functional cur-
rency and the currency in which the transaction was denominated changed.
*The effect of the change should be included as a*: Component of income
whether the change results in a gain or loss
7. An entity denominated a December 15, 20X6, purchase of goods in a cur-
rency other than its functional currency. The transaction resulted in a payable
fixed in terms of the amount of foreign currency and was paid on the settle-
ment date, January 20, 20X7. *The exchange rates between the functional cur-
rency and the currency in which the transaction was denominated changed at
December 31, 20X6, resulting in a loss that should*: Be included as a component
of income from continuing operations for 20X6
8. On November 15, 20X3, Chow Inc., a U.S. company, ordered merchandise
FOB shipping point from a German company for €200,000. The merchandise
was shipped and invoiced on December 10, 20X3. Chow paid the invoice on
January 10, 20X4. The spot rates for euros on the respective dates were
November 15, 20X3 $0.4955 December 10, 20X3 0.4875 December 31, 20X3
0.4675
January 10, 20X4 0.4475
*In Chow's December 31, 20X3, income statement, the foreign exchange gain
is*: $4,000
9. Stees Corporation had the following foreign currency transactions during
20X2. First, it purchased merchandise from a foreign supplier on January 20,
20X2, for the U.S. dollar equivalent of $90,000. The invoice was paid on March
20, 20X2, at the U.S. dollar equivalent of $96,000. Second, on July 1, 20X2,
Stees borrowed the U.S. dollar equivalent of $500,000 evidenced by a note that
was payable in the lender's local currency on July 1, 20X4. On December 31,
20X2, the U.S. dollar equivalents of the principal amount and accrued interest
were $520,000 and $26,000, respectively. Interest on the note is 10 percent per
annum. In Stees's 20X2 income statement, *what amount should be included
as a foreign exchange loss?*: $27,000
10. On September 1, 20X1, Cott Corporation received an order for equipment
from a foreign customer for 300,000 LCUs when the U.S. dollar equivalent
was $96,000. Cott shipped the equipment on October 15, 20X1, and billed the
customer for 300,000 LCUs when the U.S. dollar equivalent was $100,000. Cott
received the customer's remittance in full on November 16, 20X1, and sold
, Advanced Financial Accounting Final MC
Study online at https://quizlet.com/_bg5on8
the 300,000 LCUs for $105,000. In its income statement for the year ended
December 31, 20X1, *Cott should report a foreign exchange gain of*: $5,000
11. On April 8, 20X3, Trul Corporation purchased merchandise from an unaffili-
ated foreign company for 10,000 units of the foreign company's local currency.
Trul paid the bill in full on March 1, 20X4, when the spot rate was $0.45. The
spot rate was $0.60 on April 8, 20X3, and was $0.55 on December 31, 20X3.
For the year ended December 31, 20X4, *Trul should report a transaction gain
of*: $1,000
12. On October 1, 20X5, Stevens Company, a U.S. company, contracted to
purchase foreign goods requiring payment in pesos one month after their
receipt in Stevens's factory. Title to the goods passed on December 15, 20X5.
The goods were still in transit on December 31, 20X5. Exchange rates were 1
dollar to 22 pesos, 20 pesos, and 21 pesos on October 1, December 15, and
December 31, 20X5, respectively. *Stevens should account for the exchange
rate fluctuations in 20X5 as*: A gain included in income before discontinued
operations.
13. On October 2, 20X5, Louis Co., a U.S. company, purchased machinery from
Stroup, a German company, with payment due on April 1, 20X6. If Louis's 20X5
operating income included no foreign exchange gain or loss, *the transaction
could have*: Been denominated in U.S. dollars.
14. Cobb Co. purchased merchandise for 300,000 pounds from a vendor in
London on November 30, 20X5. Payment in British pounds (£) was due on
January 30, 20X6. The exchange rates to purchase 1 pound were as follows:
Spot rates: November $1.65, December $1.62
30-day rate: November 1.64, December 1.59
60-day rate: November 1.63, December 1.56
*In its December 31, 20X5, income statement, what amount should Cobb report
as a foreign exchange gain?*: $9,000
15. Certain balance sheet accounts in a foreign subsidiary of Shaw Company
on December 31, 20X1, have been restated in U.S. dollars as follows:
*Accounts Receivable, Current* (Current rate = $100,000) (Historical rate =
$110,000)
*Accounts Receivable, Long-Term* (C=50,000) (H=55,000)
*Prepaid Insurance* (C=25,000) (H=30,000)
*Patents* (C=40,000) (H=45,000)
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