Posted: August 31st, 2016
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
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