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Solutions for Advanced Financial Accounting Final MC 1st edition by Nathalie Johnstone
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Solutions for Advanced Financial Accounting Final MC 1st edition by Nathalie Johnstone
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Solutions for Advanced FinancialAccounting Final MC 1st edition by
Nathalie Johnstone
Dale Inc., a U.S. company, bought machine parts from a German company on March 1, 20X1,
for €30,000, when the spot rate for euros was $0.4895. Dale's year-end was March 31, when
the spot rate was $0.4845. On April 20, 20X1, Dale paid the liability with €30,000 acquired at a
rate of $0.4945. *Dale's income statements should report a foreign exchange gain or loss for the
years ended March 31, 20X1 and 20X2 of* - ANS20X1: $150 Gain
20X2: $300 Loss
Marvin Company's receivable from a foreign customer is denominated in the customer's local
currency. This receivable of 900,000 LCUs has been translated into $315,000 on Marvin's
December 31, 20X5, balance sheet. On January 15, 20X6, the receivable was collected in full
when the exchange rate was 3 LCU to $1. *The journal entry Marvin should make to record the
collection of this receivable is* - ANSDR Foreign Currency Units 300,000
DR Exchange loss 15000
CR A/R 315,000
On July 1, 20X1, Black Company lent $120,000 to a foreign supplier, evidenced by an
interest-bearing note due on July 1, 20X2. The note is denominated in the borrower's currency
and was equivalent to 840,000 LCUs on the loan date. The note principal was appropriately
included at $140,000 in the receivables section of Black's December 31, 20X1, balance sheet.
The note principal was repaid to Black on the July 1, 20X2, due date when the exchange rate
was 8 LCUs to $1. In its income statement for the year ended December 31, 20X2, *what
amount should Black include as a foreign currency transaction gain or loss on the note
principal?* - ANS$35,000 loss
If 1 Canadian dollar can be exchanged for 90 cents of U.S. currency, *what fraction should be
used* to compute the indirect quotation of the exchange rate expressed in Canadian dollars? -
ANS1/.90
On July 1, 20X4, Bay Company borrowed 1,680,000 local currency units (LCUs) from a foreign
lender evidenced by an interest-bearing note due on July 1, 20X5, which is denominated in the
currency of the lender. The U.S. dollar equivalent of the note principal was as follows:
7/1/X4 (date borrowed) $210,000
12/31/X4 (Bay's year-end) $240,000
, 7/1/X5 (date repaid) $280,000
*In its income statement for 20X5, what amount should Bay include as a foreign exchange gain
or loss on the note principal?* - ANS$40,000 loss
An entity denominated a sale of goods in a currency other than its functional currency. The sale
resulted in a receivable fixed in terms of the amount of foreign currency to be received. The
exchange rate between the functional currency and the currency in which the transaction was
denominated changed. *The effect of the change should be included as a* - ANSComponent of
income whether the change results in a gain or loss
An entity denominated a December 15, 20X6, purchase of goods in a currency other than its
functional currency. The transaction resulted in a payable fixed in terms of the amount of foreign
currency and was paid on the settlement date, January 20, 20X7. *The exchange rates between
the functional currency and the currency in which the transaction was denominated changed at
December 31, 20X6, resulting in a loss that should* - ANSBe included as a component of
income from continuing operations for 20X6
On November 15, 20X3, Chow Inc., a U.S. company, ordered merchandise FOB shipping point
from a German company for €200,000. The merchandise was shipped and invoiced on
December 10, 20X3. Chow paid the invoice on January 10, 20X4. The spot rates for euros on
the respective dates were
November 15, 20X3 $0.4955
December 10, 20X3 $0.4875
December 31, 20X3 $0.4675
January 10, 20X4 $0.4475
*In Chow's December 31, 20X3, income statement, the foreign exchange gain is* - ANS$4,000
Stees Corporation had the following foreign currency transactions during 20X2. First, it
purchased merchandise from a foreign supplier on January 20, 20X2, for the U.S. dollar
equivalent of $90,000. The invoice was paid on March 20, 20X2, at the U.S. dollar equivalent of
$96,000. Second, on July 1, 20X2, Stees borrowed the U.S. dollar equivalent of $500,000
evidenced by a note that was payable in the lender's local currency on July 1, 20X4. On
December 31, 20X2, the U.S. dollar equivalents of the principal amount and accrued interest
were $520,000 and $26,000, respectively. Interest on the note is 10 percent per annum. In
Stees's 20X2 income statement, *what amount should be included as a foreign exchange loss?*
- ANS$27,000
On September 1, 20X1, Cott Corporation received an order for equipment from a foreign
customer for 300,000 LCUs when the U.S. dollar equivalent was $96,000. Cott shipped the
equipment on October 15, 20X1, and billed the customer for 300,000 LCUs when the U.S. dollar
equivalent was $100,000. Cott received the customer's remittance in full on November 16,
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