Multiple Choice: Exchange Transactions Select the correct answer for each of the following:

if When a company operates in a global environment, decisions about its operations may be influenced by:

a. The currency in which transactions take place.

b. Differences in the nature of economic activity between countries.

c. The proportion of sales that take place in each country.

d. All of the above factors.

A sale on credit from a U.S. company to a customer in a different country may involve an exchange gain or loss if:

a. The exchange rate between the currencies remains fixed.

b. The sale is denominated in U.S. dollars.

c. The seller accepts the currency of the buyer as payment.

d. The exchange transaction takes place after year-end.

If Ward Manufacturing, a U.S. company, sells heavy equipment to a customer in London and accepts a note receivable denominated in British pounds, due in 90 days, Ward could suffer an exchange loss when:

a. The customer does not make full payment because of defects in the equipment.

b. The value of the pound increases relative to the dollar

(a pound buys more dollars) before the note is paid.

c. The value of the pound decreases relative to the dollar (a pound buys fewer dollars) before the note is paid.

d. The note requires that interest be paid in British pounds.
Jurgens Arts, a U.S. company, buys and sells art objects that it purchases from Southeast Asian countries. A recent shipment arrived from Indonesia. The bill is for 7 million rupiah, payable in 30 days. The current exchange rate 1s 7,000 rupiah for $1. Jurgens would record the transaction as:

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a. Art Inventory 7,000,000 Accounts Payable 7,000,000 b. Art Inventory 1,000 Accounts Payable 1,000 c. Art Inventory 7,000 Accounts Payable 1,000 Exchange Gain 6,000 d. Art Inventory 7,000 Accounts Payable 7,000