1-18 Flashcards
(18 cards)
1
Q
- On September 1, 2024, Kabado Inc. received an order for equipment from a foreign customer for 300,000 local currency units (LCU) when the US dollar equivalent was 596,000. Kabado Inc shipped the equipment on October 15, 2024, and billed the customer for 300,000 LCU when the US dollar equivalent was $100,000. Kabado Inc received the customer’s remittance in full on November 16, 2024, and sold the 300,000 LCU for $105,000. In its income statement for the year ended December 31, 2024, Kabado should report as part of net income a foreign exchange transaction gain of $0 $4,000 $5,000 $9,000
A
5000
2
Q
- On September 1, 2023, Cano & Pnoy., a US corporation, sold merchandise to a foreign firm for 250,000 Botswana pula. Terms of the sale require payment in pula on February 1, 2024. On September 1, 2023, the spot exchange rate was $.20 per pula. At December 31, 2024, Cano’s year-end, the spot rate was $.19, but the rate increased to $.22 by February 1, 2024, when payment was received. How much should Cano & Pnoy report as foreign exchange transaction gain or loss as part of 2024 income? SO. $2,500 loss. $5,000 gain. 57,500 gain.
A
57,500 gain
3
Q
- Lindy, a US corporation, bought inventory items from a supplier in Argentina on November 5, 2023, for 100,000 Argentine pesos, when the spot rate was $.4295. At Lindy’s December 31, 2023 year-end, the spot rate was $.4245. On January 15, 2024, Lindy bought 100,000 pesos at the spot rate of $4345 and paid the invoice. How much should Lindy report as part of net income for 2023 and 2024 as foreign exchange transaction gain or loss? 2023 2024 $500 $(1,000) $O $ (500) $ (500) $O $(1000) $ 500
A
-1000
4
Q
- Camote, purchased merchandise for £300,000 from a vendor in London on November 30, 2023. Payment in British pounds was due on January 30, 2024. The exchange rates to purchase one pound were as follows: In its December 31, 2023, income statement, what amount should Hunt report as foreign exchange transaction gain as part of net income? a. $12,000 b. $ 9,000 d. $0 c. $ 6,000
A
b. $ 9,000
5
Q
- Derivatives are financial instruments that derive their value from changes in a benchmark based on any of the fol lowing except Stock prices. Mortgage and currency rates. Commodity prices. Discounts on accounts receivable.
A
Discounts on accounts receivable.
6
Q
- Derivative instruments are financial instruments or other contracts that must contain One or more underlyings, or one or more notional amounts. No initial net investment or smaller net investment than required for similar response contacts. Terms that do not require or permit net settlement or delivery of an asset. All of the above.
A
No initial net investment or smaller net investment than required for similar response contacts.
7
Q
- The basic purpose of derivative financial instruments is to manage some kind of risk such as all of the following except Stock price movements. Interest rate variations. Currency fluctuations. Uncollectibility of accounts receivables.
A
Uncollectibility of accounts receivables.
8
Q
- Which of the following statements is(are) true regarding derivative financial instruments? I. Derivative financial instruments should be measured at fair value and reported in the balance sheet as assets or liabilities. II. Gains and losses on derivative instruments not designated as hedging activities should be reported and recognized in earnings in the period of the change in fair value. I only. Il only. Both | and II. Neither I nor lI.
A
Both | and II.
9
Q
- A hedge of the exposure to changes in the fair value of a recognized asset or liability, or an unrecognized firm commitmen is classified as a Fair value hedge. Cash flow hedge. Foreign currency hedge. Underlying.
A
Fair value hedge.
10
Q
- Gains and losses on the hedged asset/liability and the hedged instrument for a fair value hedge will be recognized In current earings, In other comprehensive income. On a cumulative basis from the change in expected cash flows from the hedged instrument. On the balance sheet either as an asset or a liability.
A
In current earings
11
Q
- Imp entered into the first fonward contract to hedge a purchase of inventory in November 2023, payable in March 2024. At December 31, 2023, what amount of foreign currency transaction gain from this forward contract should Imp include in net income? a. $0 b. $ 3,000 $ 5,000 d. $10,000
A
b. $ 3,000
12
Q
- At December 31, 2023, what amount of foreign currency transaction loss should Imp include in income from the revaluation of the Accounts Payable of 100,000 euros incurred as a result of the purchase of inventory at November 30, 2023, payable in March 2024? $0 $3,000 $4,000 $5.000
A
5
13
Q
- Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp’s specifications. The expected delivery date is March 2024 at which time settlement is due to the manufacturer. The hedge qualifies as a fair value hedge. At December 31, 2023, what amount of foreign currency transaction gain from this forward contract should Imp include in net income?
a. $0 b. $ 3,000 $ 5,000 d. $10,000
A
b. $ 3,000
14
Q
- There was no work in process inventory at the beginning or end of the year. Kay’s 20x9 cost of goods sold is $950,000 $965,000 $975,000 $995,000
A
950000
15
Q
- For the month of March 20x9, prime cost was a. $ 90,000 b. $120,000 c. $144,000 d. $150,000
A
d. $150,000
16
Q
- For the month of March 20x9, conversion cost was a. $ 90,000 b. $140,000 c. $144,000 d. $170,000
A
b. $140,000
17
Q
- For the month of March 20x9, cost of goods manufactured was b. $224,000 c. $230,000 a. $218,000 d. $170,000 d. $236,000
A
d. $236,000
18
Q
- Imp entered into the third forward contract for speculation. At December 31, 2024, what amount of foreign currency transaction gain from this forward contract should Imp include in net income?
a. $O
b. $ 3,000
c. $ 5,000
d. $10,000
A
$3,000
