Foreign Currency Denominated Transactions Flashcards Preview

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Flashcards in Foreign Currency Denominated Transactions Deck (13)
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1

A foreign currency transaction is a transaction of a domestic entity denominated in a foreign currency, but to be recorded on the domestic entity's books in the _____ _____.

Domestic currency

2

A foreign currency translation is when financial statements are denominated in a _____ ______ but to be reported in the FS expressed in the domestic currency.

Foreign currency (1 Euro = $1.24)

3

The direct exchange rate measues how much domestic currenct must be exchanged to recieve one unit of foreign currency. TF

True ($1 = .846 Euro)

4

An ____ ____ measures how may units of foreign currency may be purchased with one unit of domestic currency.

Indirect rate

5

A spot rate is....

the exchange rate on the current date.

6

A forward rate is...

the exchange rate now for delivery at a future date

7

Functional currency is the currency of the primary economic environment. TF

True

8

If the domestic currency strenghtens, AP in the foreign currency would result in an exchange loss or an exchange gain?

Exchange gain

9

If the domestic currency strenghtens, AR in the foreign currency would result in an exchange loss or an exchange gain?

Exchange loss

10

In the period in which the exchange rate changes, an adjustment to the account balance (AR or AP) as a gain or a loss is recorded. TF

True

11

Exchange gains and losses are recorded in current period income as extraordinary events. TF

False, income from continuing operations

12

Gains and losses are contrasted by the spot rate at the time of the transaction against the spot rate at the balance sheet date. TF

True

13

Import transactions result in reciveables, export transactions result in payables. TF

False, vice versa