From Advanced Accounting - Fifth Edition Debra C. and Paul K.

EXERCISE 12-3 Multiple ChoiceImporting Transactions L06 On December 1, 2008, Tuscano Corp. entered into a transaction to import raw materials from a foreign company. The account is to be settled on February 1 with the payment of 60,000 foreign currency units (FCU). On December 1, Tuscano also entered into a forward contract to hedge the exposed position resulting from the import transaction. The forward rate is $.71 per unit of foreign currency. Tuscano Corp. has a December 31 fiscal year-end. Spot rates and the forward rates on relevant dates were: Forward Rate Feb. I Settlement) Spot Rate per Unit of Foreign Currency Date $.71 $.69 72 73 December 1 December 31 February1 715 73 4. What amount of net transaction gain or loss from the transactions should be included in the determination of the 2008 net income? (a) $1,500 loss. (b) $1,800 loss. (c) S-0 Because a gain or loss on the forward contract is offset by a loss or gain on the exposed position (d) $2,400 gain Which of the following statements is not true? (a) Assuming the account payable is to be settled on February 1, Tuscano Corp. was 5. able to reduce its cash outflow for the purchases as a result of entering into the for- ward contract. (b) During 2009, a transaction loss of $600 was recorded on the forward contract. (c) Tuscano Corp. paid $42,600 to complete the forward contract (d) During 2009 a transaction loss of $600 was recorded on the exposed payable