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Advanced Accounting Study Set 14
Quiz 12: Accounting for Foreign Currency Transactions and Hedging Foreign Exchange Risk
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Question 1
Multiple Choice
The forward exchange rate quoted for the remaining term of a forward contract is used to account for the contract when the forward contract:
Question 2
Multiple Choice
Madison Paving Company purchased equipment for 350,000 British pounds from a supplier in London on July 7, 2017. Payment in British pounds is due on Sept. 7, 2017. The exchange rates to purchase one pound is as follows:
On its August 31, 2017 income statement, what amount should Madison Paving report as a foreign exchange transaction gain:
Question 3
Multiple Choice
With respect to disclosure requirements for fair value measurements, which of the following is NOT one of the three levels in the hierarchy of classifying fair value measurements?
Question 4
Multiple Choice
On September 1, 2017, Mudd Plating Company entered into two forward exchange contracts to purchase 250,000 euros each in 90 days. The relevant exchange rates are as follows:
The second forward contract was strictly for speculation. On September 30, 2017, what amount of foreign currency transaction gain should Mudd Plating report in income?
Question 5
Multiple Choice
A transaction gain or loss at the settlement date is:
Question 6
Multiple Choice
The discount or premium on a forward contract entered into as a hedge of an exposed asset or liability position should be:
Question 7
Multiple Choice
A transaction loss would result from:
Question 8
Multiple Choice
From the viewpoint of a U.S. company, a foreign currency transaction is a transaction:
Question 9
Multiple Choice
On September 1, 2017, Mudd Plating Company entered into two forward exchange contracts to purchase 250,000 euros each in 90 days. The relevant exchange rates are as follows:
The first forward contract was to hedge a purchase of inventory on September 1, payable on December 1. On September 30, what amount of foreign currency transaction loss should Mudd Plating report in income?
Question 10
Multiple Choice
Greco, Inc. a U.S. corporation, bought machine parts from Franco Company of Germany on March 1, 2017, for 70,000 marks, when the spot rate for marks was $0.5395. Greco's year-end was March 31, 2017, when the spot rate for marks was $0.5445. Greco bought 70,000 marks and paid the invoice on April 20, 2017, when the spot rate was $0.5495. How much should be shown in Greco's income statements as foreign exchange (transaction) gain or loss for the years ended March 31, 2017 and 2018?
Question 11
Multiple Choice
A discount or premium on a forward contract is deferred and included in the measurement of the related foreign currency transaction if the contract is classified as a: