1. A contract giving the right to receive a specified quantity of foreign currency at a future date is known as a:

Multiple Choice

• Specified contract.

• Future contract.

• Hedging contract.

• Foreign contract

2.Assume the exchange rate for the Canadian dollar is rising relative to the U.S. dollar. An American company will incur losses from this rising exchange rate if it is making:

Multiple Choice

• Credit sales to Canadian companies at prices stated in Canadian dollars.

• Credit purchases from Canadian companies at prices stated in Canadian dollars.

• Credit sales to Canadian companies at prices stated in U.S. dollars.

• Credit purchases from Canadian companies at prices stated in U.S. dollars.

3.Establishing international accounting standards is the responsibility of:

Multiple Choice

• Securities and Exchange Commission.

• Accounting Association of America.

• International Accounting Standards Board.

• Financial Accounting Standards Board.

4.If the exchange rate for a foreign currency (stated in dollars) has risen, a dollar will purchase:

Multiple Choice

• An increased amount of that foreign currency.

• A smaller amount of that foreign currency.

• An unchanged amount of that foreign currency.

• An undetermined amount of that foreign currency.

5.Gains and losses from fluctuations in exchange rates should be shown on the:

Multiple Choice

• Income statement.

• Statement of changes to owners' equity.

• Balance sheet.

• Statement of cash flows.

6.Tuliptime, Inc. sold American fashions to a Japanese company at a price of 4.1 million yen. On the sale date, the exchange rate was $0.01 per Japanese yen, but when Tuliptime received payment from its customer, the exchange rate was $0.0103 per yen. When the foreign receivable was collected, Tuliptime:

Multiple Choice

• Debited Loss on Fluctuation of Foreign Currency for $1,230.

• Credited Sales for $1,230.

• Debited Cash for $41,000.

• Credited Gain on Fluctuation of Foreign Currency for $1,230.