Question
1. Use the following information on the U.S. dollar value of the euro to answer the question. Spot Rate Forward Rate for March 16, 2024
1. Use the following information on the U.S. dollar value of the euro to answer the question.
Spot Rate | Forward Rate for March 16, 2024 Delivery | |
---|---|---|
November 16, 2023 | $ 1.15 | $ 1.148 |
December 31, 2023 | 1.14 | 1.135 |
March 16, 2024 | 1.13 | 1.130 |
On November 16, 2023, a U.S. company makes a sale to a customer in Germany. Under the sale terms, the customer will pay the company 100,000 on March 16. On November 16, the company also enters a forward contract to sell 100,000 on March 16, 2024. On March 16, the company receives 100,000 from the customer and sells it using the forward contract. The companys accounting year ends December 31. What is the net effect on 2023 income of exchange rate changes due to the sale and the forward contract?
Select one:
a. $200 net loss
b. $300 net gain
c. $300 net loss
d. No effect
2. On October 25, 2023, a U.S. company sold merchandise on credit to a customer in Spain at an invoice price of 1,000, when the exchange rate was $1.12/. On December 31, 2023, the U.S. companys year-end, the exchange rate was $1.115/. On February 1, 2024, when the exchange rate was 1.119, the U.S. company received 1,000 in payment for the merchandise.
The U.S. companys exchange gain or loss for 2023 is Select one: a. $1 gain b. $1 loss c. $5 loss d. $5 gain
3. A Belgium subsidiarys beginning and ending trial balances appear below:
Dr (Cr) | ||
---|---|---|
January 1 | December 31 | |
Cash, receivables | 1,500 | 1,200 |
Inventories | 3,000 | 3,500 |
Plant & equipment, net | 30,000 | 39,000 |
Liabilities | (18,500) | (27,200) |
Capital stock | (4,000) | (4,000) |
Retained earnings, beginning | (12,000) | (12,000) |
Sales revenue | -- | (15,000) |
Cost of sales | 9,500 | |
Out-of-pocket selling & administrative expenses | -- | 4,000 |
Depreciation expense | -- | 1,000 |
Total | 0 | 0 |
Exchange rates ($/) are:
Beginning of year | $1.25 |
Average for year | 1.22 |
End of year | 1.20 |
The subsidiary was acquired at the beginning of the year. Its sales, inventory purchases, and out-of-pocket selling and administrative expenses occurred evenly during the year. Equipment was purchased for 10,000 when the exchange rate was $1.23. Depreciation for the year includes 200 related to the equipment purchased during the year. The ending inventory was purchased at the end of the year, and the beginning inventory was purchased at the end of the previous year. If the subsidiarys functional currency is the euro, what is the translated plant & equipment, net balance at year-end?
Select one:
a. $47,580
b. $48,554
c. $48,456
d. $46,800
4. A Belgium subsidiarys beginning and ending trial balances appear below:
Dr (Cr) | ||
---|---|---|
January 1 | December 31 | |
Cash, receivables | 1,500 | 1,200 |
Inventories | 3,000 | 3,500 |
Plant & equipment, net | 30,000 | 39,000 |
Liabilities | (18,500) | (27,200) |
Capital stock | (4,000) | (4,000) |
Retained earnings, beginning | (12,000) | (12,000) |
Sales revenue | -- | (15,000) |
Cost of sales | 9,500 | |
Out-of-pocket selling & administrative expenses | -- | 4,000 |
Depreciation expense | -- | 1,000 |
Total | 0 | 0 |
Exchange rates ($/) are:
Beginning of year | $1.25 |
Average for year | 1.22 |
End of year | 1.20 |
The subsidiary was acquired at the beginning of the year. Its sales, inventory purchases, and out-of-pocket selling and administrative expenses occurred evenly during the year. Equipment was purchased for 10,000 when the exchange rate was $1.23. Depreciation for the year includes 200 related to the equipment purchased during the year. The ending inventory was purchased at the end of the year, and the beginning inventory was purchased at the end of the previous year. If the subsidiarys functional currency is the euro, what is translated cost of sales for the year?
Select one:
a. $11,750
b. $11,590
c. $11,425
d. $10,530
5. When a share of a companys stock is selling for $55.00, a call option on the stock with a strike price of $56.00 is said to be:
Select one:
a. In the money
b. Carried at basis
c. Out of the money
d. An American option
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