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1. Alpha, Inc. a U.S. company had a receivable from a customer that was denominated in pesos. On December 31, 2008, this receivable for 75,000
1. Alpha, Inc. a U.S. company had a receivable from a customer that was denominated in pesos. On December 31, 2008, this receivable for 75,000 pesos was correctly included in Alphas balance sheet at $8,000. The receivable was collected on March 2, 2009, when the U.S. equivalent was $6,900. How much foreign exchange gain or loss will Alpha record on the income statement for the year ended December 31, 2009? a. $1,100 loss b. $1,100 gain c. $6,900 loss d. $6,900 gain e. $8,000 gain 2. Frankfurter Company, a U.S. company, had a ruble receivable from exports to Russia and a euro payable resulting from imports from Italy. Frankfurter recorded foreign exchange loss related to both its ruble receivable and euro payable. Did the foreign currencies increase or decrease in dollar value from the date of the transaction to the settlement date? Ruble Euro a) Increase Decrease b) Decrease Decrease c) Decrease Increase d) No change Decrease e) Increase Increase a. A above b. B above c. C above d. D above e. E above 3. In translating a foreign subsidiarys financial statements, which exchange rate does the current method require for the subsidiarys assets and liabilities? a. The exchange rate in effect when each asset or liability was acquired. b. The average exchange rate for the current year c. A calculated exchange rate based on market value. d. The exchange rate in effect as of the balance sheet date
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