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Advanced Financial Accounting Final MC with answer

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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 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 On July 1, 20X1, Black Company lent $120,000 to a foreign supplier, evidenced by an interest-bearing note due on July 1, 20X2. The note is denominated 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 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 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 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 currency 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 An entity denominated a December 15, 20X6, purchase of goods in a currency 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 settlement date, January 20, 20X7. *The exchange rates between the functional currency 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 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 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 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 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 On April 8, 20X3, Trul Corporation purchased merchandise from an u

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advanced financial accounting final mc with answer

Voorbeeld van de inhoud

Advanced Financial Accounting Final MC
io io io io

DaleioInc.,ioaioU.S.iocompany,ioboughtiomachineiopartsiofromioaioGermaniocompanyioonioMarchio1,io20X1,ioforio€3
0,000,iowheniotheiospotiorateioforioeurosiowasio$0.4895.ioDale'sioyear-
endiowasioMarchio31,iowheniotheiospotiorateiowasio$0.4845.ioOnioAprilio20,io20X1,ioDaleiopaidiotheioliabilityiowithio€
30,000ioacquiredioatioaiorateioofio$0.4945.io*Dale'sioincomeiostatementsioshouldioreportioaioforeignioexchangeiog
ainiooriolossioforiotheioyearsioendedioMarchio31,io20X1ioandio20X2ioof* 20X1:io$150ioGain

20X2:io$300ioLoss

MarvinioCompany'sioreceivableiofromioaioforeigniocustomerioisiodenominatedioiniotheiocustomer'siolocaliocurren
cy.ioThisioreceivableioofio900,000ioLCUsiohasiobeeniotranslatediointoio$315,000ioonioMarvin'sioDecemberio31,io20
X5,iobalanceiosheet.ioOnioJanuaryio15,io20X6,iotheioreceivableiowasiocollectedioiniofulliowheniotheioexchangeiorateio
wasio3ioLCUiotoio$1.io*TheiojournalioentryioMarvinioshouldiomakeiotoiorecordiotheiocollectionioofiothisioreceivableioi
s* DRioForeignioCurrencyioUnitsio300,000

DRioExchangeiolossio15000

CRioA/Rio315,000

OnioJulyio1,io20X1,ioBlackioCompanyiolentio$120,000iotoioaioforeigniosupplier,ioevidencediobyioaniointerest-
bearingionoteiodueioonioJulyio1,io20X2.ioTheionoteioisiodenominatedioiniotheioborrower'siocurrencyioandiowasioequi
valentiotoio840,000ioLCUsiooniotheioloaniodate.ioTheionoteioprincipaliowasioappropriatelyioincludedioatio$140,000io
iniotheioreceivablesiosectionioofioBlack'sioDecemberio31,io20X1,iobalanceiosheet.ioTheionoteioprincipaliowasiorepai
diotoioBlackiooniotheioJulyio1,io20X2,iodueiodateiowheniotheioexchangeiorateiowasio8ioLCUsiotoio$1.ioInioitsioincomeiost
atementioforiotheioyearioendedioDecemberio31,io20X2,io*whatioamountioshouldioBlackioincludeioasioaioforeigniocu
rrencyiotransactioniogainiooriolossiooniotheionoteioprincipal?* $35,000ioloss

Ifio1ioCanadianiodollariocaniobeioexchangedioforio90iocentsioofioU.S.iocurrency,io*whatiofractionioshouldiobeioused*io
toiocomputeiotheioindirectioquotationioofiotheioexchangeiorateioexpressedioinioCanadianiodollars? 1/.90

OnioJulyio1,io20X4,ioBayioCompanyioborrowedio1,680,000iolocaliocurrencyiounitsio(LCUs)iofromioaioforeigniolenderio
evidencediobyioaniointerest-
bearingionoteiodueioonioJulyio1,io20X5,iowhichioisiodenominatedioiniotheiocurrencyioofiotheiolender.ioTheioU.S.iodolla
rioequivalentioofiotheionoteioprincipaliowasioasiofollows:

7/1/X4io(dateioborrowed)io$210,000io

12/31/X4io(Bay'sioyear-end)io$240,000io

7/1/X5io(dateiorepaid)io$280,000

,*Inioitsioincomeiostatementioforio20X5,iowhatioamountioshouldioBayioincludeioasioaioforeignioexchangeiogainiooriolo
ssiooniotheionoteioprincipal?* $40,000ioloss

Anioentityiodenominatedioaiosaleioofiogoodsioinioaiocurrencyiootheriothanioitsiofunctionaliocurrency.ioTheiosaleiores
ultedioinioaioreceivableiofixedioiniotermsioofiotheioamountioofioforeigniocurrencyiotoiobeioreceived.ioTheioexchangeio
rateiobetweeniotheiofunctionaliocurrencyioandiotheiocurrencyioiniowhichiotheiotransactioniowasiodenominatedioch
anged.io*Theioeffectioofiotheiochangeioshouldiobeioincludedioasioa*
Componentioofioincomeiowhetheriotheiochangeioresultsioinioaiogainioorioloss

AnioentityiodenominatedioaioDecemberio15,io20X6,iopurchaseioofiogoodsioinioaiocurrencyiootheriothanioitsiofunctio
naliocurrency.ioTheiotransactionioresultedioinioaiopayableiofixedioiniotermsioofiotheioamountioofioforeigniocurrencyio
andiowasiopaidiooniotheiosettlementiodate,ioJanuaryio20,io20X7.io*Theioexchangeioratesiobetweeniotheiofunctionali
ocurrencyioandiotheiocurrencyioiniowhichiotheiotransactioniowasiodenominatediochangedioatioDecemberio31,io20X

6,ioresultingioinioaiolossiothatioshould*
Beioincludedioasioaiocomponentioofioincomeiofromiocontinuingiooperationsioforio20X6

OnioNovemberio15,io20X3,ioChowioInc.,ioaioU.S.iocompany,ioorderediomerchandiseioFOBioshippingiopointiofromioai
oGermaniocompanyioforio€200,000.ioTheiomerchandiseiowasioshippedioandioinvoicedioonioDecemberio10,io20X3.io

ChowiopaidiotheioinvoiceioonioJanuaryio10,io20X4.ioTheiospotioratesioforioeurosiooniotheiorespectiveiodatesiowere

Novemberio15,io20X3io$0.4955io

Decemberio10,io20X3io$0.4875io

Decemberio31,io20X3io$0.4675io

Januaryio10,io20X4io$0.4475

*InioChow'sioDecemberio31,io20X3,ioincomeiostatement,iotheioforeignioexchangeiogainiois* $4,000

SteesioCorporationiohadiotheiofollowingioforeigniocurrencyiotransactionsioduringio20X2.ioFirst,ioitiopurchasediome
rchandiseiofromioaioforeigniosupplierioonioJanuaryio20,io20X2,ioforiotheioU.S.iodollarioequivalentioofio$90,000.ioThei
oinvoiceiowasiopaidioonioMarchio20,io20X2,ioatiotheioU.S.iodollarioequivalentioofio$96,000.ioSecond,ioonioJulyio1,io20

X2,ioSteesioborrowediotheioU.S.iodollarioequivalentioofio$500,000ioevidencediobyioaionoteiothatiowasiopayableioiniot
heiolender'siolocaliocurrencyioonioJulyio1,io20X4.ioOnioDecemberio31,io20X2,iotheioU.S.iodollarioequivalentsioofiothei
oprincipalioamountioandioaccruediointerestiowereio$520,000ioandio$26,000,iorespectively.ioInterestiooniotheionot

eioisio10iopercentioperioannum.ioInioStees'sio20X2ioincomeiostatement,io*whatioamountioshouldiobeioincludedioasio
aioforeignioexchangeioloss?* $27,000

OnioSeptemberio1,io20X1,ioCottioCorporationioreceivedioanioorderioforioequipmentiofromioaioforeigniocustomeriof
orio300,000ioLCUsiowheniotheioU.S.iodollarioequivalentiowasio$96,000.ioCottioshippediotheioequipmentioonioOctob
erio15,io20X1,ioandiobillediotheiocustomerioforio300,000ioLCUsiowheniotheioU.S.iodollarioequivalentiowasio$100,000
.ioCottioreceivediotheiocustomer'sioremittanceioiniofullioonioNovemberio16,io20X1,ioandiosoldiotheio300,000ioLCUsiof
orio$105,000.ioInioitsioincomeiostatementioforiotheioyearioendedioDecemberio31,io20X1,io*Cottioshouldioreportioaiof
oreignioexchangeiogainioof* $5,000

, OnioAprilio8,io20X3,ioTrulioCorporationiopurchasediomerchandiseiofromioaniounaffiliatedioforeigniocompanyioforio
10,000iounitsioofiotheioforeigniocompany'siolocaliocurrency.ioTruliopaidiotheiobillioiniofullioonioMarchio1,io20X4,iowhe
niotheiospotiorateiowasio$0.45.ioTheiospotiorateiowasio$0.60ioonioAprilio8,io20X3,ioandiowasio$0.55ioonioDecemberio3
1,io20X3.ioForiotheioyearioendedioDecemberio31,io20X4,io*Trulioshouldioreportioaiotransactioniogainioof* $1,000

OnioOctoberio1,io20X5,ioStevensioCompany,ioaioU.S.iocompany,iocontractediotoiopurchaseioforeigniogoodsiorequiri
ngiopaymentioiniopesosiooneiomonthioafteriotheirioreceiptioinioStevens'siofactory.ioTitleiotoiotheiogoodsiopassediooni
oDecemberio15,io20X5.ioTheiogoodsiowereiostillioiniotransitioonioDecemberio31,io20X5.ioExchangeioratesiowereio1iod

ollariotoio22iopesos,io20iopesos,ioandio21iopesosioonioOctoberio1,ioDecemberio15,ioandioDecemberio31,io20X5,iores
pectively.io*Stevensioshouldioaccountioforiotheioexchangeiorateiofluctuationsioinio20X5ioas*
Aiogainioincludedioinioincomeiobeforeiodiscontinuediooperations.

OnioOctoberio2,io20X5,ioLouisioCo.,ioaioU.S.iocompany,iopurchasediomachineryiofromioStroup,ioaioGermaniocompa
ny,iowithiopaymentiodueioonioAprilio1,io20X6.ioIfioLouis'sio20X5iooperatingioincomeioincludedionoioforeignioexchang
eiogainioorioloss,io*theiotransactioniocouldiohave* BeeniodenominatedioinioU.S.iodollars.

CobbioCo.iopurchasediomerchandiseioforio300,000iopoundsiofromioaiovendorioinioLondonioonioNovemberio30,io20
X5.ioPaymentioinioBritishiopoundsio(£)iowasiodueioonioJanuaryio30,io20X6.ioTheioexchangeioratesiotoiopurchaseio1iop
oundiowereioasiofollows:

Spotiorates:ioNovemberio$1.65,ioDecemberio$1.62

30-dayiorate:ioNovemberio1.64,ioDecemberio1.59io

60-dayiorate:ioNovemberio1.63,ioDecemberio1.56

*InioitsioDecemberio31,io20X5,ioincomeiostatement,iowhatioamountioshouldioCobbioreportioasioaioforeignioexchan
geiogain?* $9,000

CertainiobalanceiosheetioaccountsioinioaioforeigniosubsidiaryioofioShawioCompanyioonioDecemberio31,io20X1,iohav
eiobeeniorestatedioinioU.S.iodollarsioasiofollows:

*AccountsioReceivable,ioCurrent*io(Currentiorateio=io$100,000)io(Historicaliorateio=io$110,000)

*AccountsioReceivable,ioLong-Term*io(C=50,000)io(H=55,000)

*PrepaidioInsurance*io(C=25,000)io(H=30,000)

*Patents*io(C=40,000)io(H=45,000)

-----------------------------------

TotalioC=$215,000ioH=$240,000
io

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