Posted: April 17th, 2016

which of the following statements is true?>?

1. A foreign currency transaction gain will be recognized by a U.S. company when it has a receivable from a foreign company
a. denominated in dollars and the foreign currency weakens relative to the dollar before payment is received.
b. denominated in foreign currency and the foreign currency strengthens relative to the dollar before payment is received.
c. denominated in dollars and the foreign currency strengthens relative to the dollar before payment is received.
d. denominated in foreign currency and the foreign currency weakens relative to the dollar before payment is received.

2. On October 1, 2008, a U.S. company acquired goods from a Japanese company for 840,000 yen, payable in yen on April 1, 2009. Spot rates on various dates follow:
Transaction date 100.0 yen = 1 US dollar
Balance Sheet date (12/31/08) 87.5 yen = 1 US dollar
Settlement date 120.0 yen = 1 US dollar

As a result of this transaction, the U.S. company has a foreign currency transaction gain (loss) in 2008 and 2009 of (rounded):

2008 2009
a. $(1,200) $2,600
b. $1,400 $1,200
c. $1,200 $(2,600)
d. $(1,200) $1,400

3. The transaction gain or loss to be recognized over the term of a forward exchange contract entered into to speculate in a foreign currency within a fiscal year is measured by the difference between the
a. spot rate at inception of the contract and forward rate at inception of the contract.
b. spot rate at inception of the contract and spot rate at settlement of the contract.
c. forward rate at inception of the contract and spot rate at settlement of the contract.
d. forward rate at inception of the contract and forward rate at settlement of the contract.

4. Bowman Company reported translation adjustments in its stockholders’ equity section of $2,000,000. These adjustments were added to the other items disclosed in Bowman’s stockholders’ equity. Bowman’s translation adjustments resulted from its 80% interest in the capital stock of a Danish subsidiary. Based upon the facts presented, which of the following statements is true?
a. The credits in dollars on the Danish trial balance exceeded the debits in dollars by $2,000,000.
b. The debits in dollars on the Danish trial balance exceeded the credits in dollars by $2,000,000.
c. The debits in dollars on the Danish trial balance exceeded the credits in dollars by $2,500,000.
d. The credits in dollars on the Danish trial balance exceeded the debits in dollars by $2,500,000.

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