Question :
61.On November 1, a French company purchased machinery from an : 1237538
61.On November 1, a French company purchased machinery from an American company for 800,000 Euros when the exchange rate was $0.83. When preparing financial statements on December 31, assuming the rate for Euros was $0.88, what amount of gain or loss should the American company report?
A. $40,000 gain.
B. $40,000 loss.
C. $19,000 gain.
D. No gain or loss would be reported.
€800,000 × ($0.88 – $0.83) = $40,000 gain
62.Assume the exchange rate for the Canadian dollar is rising relative to the U.S. dollar. An American company will incur losses from this rising exchange rate if it is making:
A. Credit sales to Canadian companies at prices stated in Canadian dollars.
B. Credit purchases from Canadian companies at prices stated in U.S. dollars.
C. Credit sales to Canadian companies at prices stated in U.S. dollars.
D. Credit purchases from Canadian companies at prices stated in Canadian dollars.
63.Assume the exchange rate for the Mexican Peso is falling relative to the U.S. dollar. An American company will incur losses from this falling exchange rate if the company is making:
A. Credit sales to Mexican companies at prices stated in U.S. dollars.
B. Credit purchases from Mexican companies at prices stated in U.S. dollars.
C. Credit sales to Mexican companies at prices stated in Mexican Pesos.
D. Credit purchases from Mexican companies at prices stated in Mexican Pesos.
64.Blue Waters is an American company that does business with several Japanese corporations. In recent months, Blue Waters has been reporting losses from increases in the exchange rate of the Japanese yen. The majority of Blue Waters transactions with the Japanese companies probably consist of:
A. Credit sales at prices stated in U.S. dollars.
B. Credit sales at prices stated in Japanese yen.
C. Credit purchases at prices stated in U.S. dollars.
D. Credit purchases at prices stated in Japanese yen.
65.A corporation that uses a strategy of hedging all contracts specifying a foreign currency (i.e. foreign accounts receivable and foreign accounts payable):
A. Will always be better off than if the contracts were not hedged.
B. Recognizes a net loss if the foreign exchange rate increases.
C. Avoids net losses from fluctuations in foreign exchange rates.
D. Recognizes a net gain if the foreign exchange rate increases.
66.Trente Switch and Signal sold equipment to a Canadian transportation company at a price of 300,000 Canadian dollars with payment due in 60 days. On the date of sale, the exchange rate was 1.50 Canadian dollars per U.S. dollar. Trente decided to hedge the risk of currency fluctuations by purchasing 300,000 Canadian dollars with payment due in 60 days. If the exchange rate in 60 days is 1.25 Canadian dollars per U.S. dollar, Trente Switch and Signal will:
A. Recognize a net gain of $40,000 on the two transactions.
B. Recognize a $40,000 gain when it collects the receivable and incur a $40,000 loss when it pays the liability.
C. Incur a $40,000 loss when it collects the receivable and recognize a $40,000 gain when it pays the liability.
D. Incur a net loss of $40,000 on the two transactions.
(C$300,000/$1.50) – (C$300,000/$1.25) = $40,000 gain when collecting the receivable and $40,000 loss when paying the liability.
67.Samson Corporation buys a foreign currency future contract as a hedging strategy to protect against possible losses from fluctuations in a particular foreign exchange. This strategy suggests that Samson Corporation has:
A. Foreign accounts payable and expects the exchange rate to fall.
B. Foreign accounts receivable and expects the exchange rate to rise.
C. Foreign accounts payable and expects the exchange rate to rise.
D. Foreign accounts receivable and expects the exchange rate to fall.
68.A contract giving the right to receive a specified quantity of foreign currency at a future date is known as a:
A. Hedging contract.
B. Specified contract.
C. Foreign contract.
D. Future contract.
69.Of the following globalization strategies, which would be least demanding in terms of the quantity and variety of accounting information required?
A. Exporting.
B. International licensing.
C. Joint ventures.
D. Establishing a wholly owned foreign subsidiary.
70.Which of the following does not affect the cost associated with producing and selling goods and services in global markets?
A. Tariffs.
B. Duties.
C. Special trade zones.
D. Sales or Use tax rates in the United States.
71.Under the Foreign Corrupt Practices Act, American business firms are required to:
A. Refuse to transact business in countries that sanction official corruption.
B. Report all bribery attempts to the International Monetary Fund and World Bank.
C. Maintain an adequate system of internal control limiting access to company assets to authorized personnel.
D. Maintain a list of all personnel employed by the company during the last 10 years.
72.The Foreign Corrupt Practices Act (FCPA) imposes _____ for managers who engage in bribes.
A. Fines
B. Deportation
C. Quotas
D. Taxes
73.The Foreign Corrupt Practices Act (FCPA) affects all of the following except:
A. United States companies.
B. Foreign companies operating in the United States.
C. Foreign companies operating solely in their home country.
D. Affiliates and agents of a United States company or a foreign company operating in the United States.
