A company based in the United States makes a transaction with a Japanese Company. The contract states that $5500,000 (U.S. dollars) must be transferred in order to settle the transaction. From the perspective of the Japanese company, this transaction is denominated in what currency?
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- Assume that a German corporation exports electronic equipment to USA in a transaction denominated in dollar. Is this transaction a foreign currency transaction? Is it a foreign transaction? Explain the difference between these two concepts and their application here.On December 2, 2020, Troll Company, a U.S. company, sold machinery to Amigo, a Mexican company, with payment due on March 4, 2021. If Troll's fiscal year-end is December 31 and its 2020 income from continuing operations does not include any foreign currency exchange gain or loss, it is most likely that: O A. Troll entered into a forward contract to purchase Mexican peso on March 4, 2021. O B. this transaction caused a foreign currency translation gain or loss to be adjusted to the accounts receivable (Mex$). O C. this sale was denominated in U.S. dollars. O D. this transaction resulted in a foreign currency transaction gain or loss to be included in other comprehensive income.Baxter Industries, Inc., is a U.S. company that has a wholly owned subsidiary. The subsidiary maintains its book and records in a foreign currency (FC) and the majority of its local expenses such as payroll, utilities, rent, etc., are paid in FC. However, the U.S. dollar is considered to be its functional currency. Selected exchange rates are as follows: 1 FC= 1 FC= March 1, 2013 . . . . . . . . . . . . $1.50 March 1, 2013 . . . . . . . . . . . . $1.50 Third quarter 2014 . . . . . . . . . 1.62 Fourth quarter 2014 . . . . . . . . 1.65 June 30, 2015. . . . . . . . . . . . . 1.70 First quarter 2015 . . . . . . . . . $1.50 Second quarter 2015 . . . . . . 1.75 Third quarter 2015 . . . . . . . . 1.71 Fourth quarter 2015 . . . . . . . 1.66 December 31, 2015 . . . . . . . 1.65 1. Identify several specific factors that would suggest that the U.S. dollar is the functional currency in spite of the fact regarding local expenses. 2. For each of the following compute the remeasured…
- A U.S. company sells a product to a British company with the transaction listed in British pounds. On the date of the sale, the transaction total of $14,500 is billed as £10,000, reflecting an exchange rate of 1.45 (that is, $1.45 per pound). Prepare the entry to record (1) the sale and (2) the receipt of payment in pounds when the exchange rate is 1.35.A U.S. exporter has a Thai baht account receivable resulting from an export sale on June 1 to a customer in Thailand. The exporter signed a forward contract on June 1 to sell Thai baht and designated it as a cash flow hedge of a recognized Thai baht receivable. The spot rate was $0.022 on that date, and the forward rate was $0.021. Which of the following did the U.S. exporter report in net income?a. Discount expenseb. Discount revenuec. Premium expensed. Premium revenueTristan Narvaja, S.A. (C). Tristan Narvaja, S.A., is the Uruguayan subsidiary of a U.S. manufacturing company. Its balance sheet for January 1 is shown in the popup window, The January 1 exchange rate between the U.S. dollar and the peso Uruguayo ($U) is $U20/$. Determine Tristan Narvaja's contribution to the translation exposure of its parent on January 1, using the current rate method. a. Determine Tristan Narvaja's contribution to the translation exposure of its parent on January 1st, using the current rate method. b. Calculate Tristan Narvaja's contribution to its parent's translation gain or loss if the exchange rate on December 31st is $U13/$. Assume all peso Uruguayo accounts remain as they were at the beginning of the year. a. Using the current rate method, what is Tristan Narvaja's contribution to the translation exposure of its parent on January 1st? $U (Round to the nearest peso Uruguayo.) Data table (Click on the following icon in order to copy its contents into a…
- Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: Current Rates Historical Rates Accounts Receivable, current $200000 $220000 Accounts Receivable, long term 100000 110000 Land 50000 55000 Patents 80000 85000 Total $430000 $470000 This subsidiary’s functional currency is a foreign currency. What total should Orchid’s balance sheet include for the preceding items? Choose the correct.a. $430,000.b. $435,000.c. $440,000.d. $450,000On October 1, 2020, Mud Co., a U.S. company, purchased parts from Terra, a Portuguese company, with payment due on December 1, 2020. If Mud's 2020 operating income included no foreign exchange gain or loss, the transaction could have _____. A. Been denominated in U.S. dollars. B. Generated a foreign exchange gain to be reported as a deferred charge on the balance sheet. C. Resulted in an extraordinary gain. D. Generated a foreign exchange loss to be reported as a separate component of stockholders' equity.Tristan Narvaja, S.A. (A). Tristan Narvaja, S.A., is the Uruguayan subsidiary of a U.S. manufacturing company. Its balance sheet for January 1 is shown in the popup window, E. The January 1 exchange rate between the U.S. dollar and the peso Uruguayo ($U) is $U24/$. Determine Tristan Narvaja's contribution to the translation exposure of its parent on January 1, using the current rate method. a. Determine Tristan Narvaja's contribution to the translation exposure of its parent on January 1st, using the current rate method. b. Calculate Tristan Narvaja's contribution to its parent's translation loss if the exchange rate on December 31st is $U24/$. Assume all peso Uruguayo accounts remain as they were at the beginning of the year. a. Using the current rate method, what is Tristan Narvaja's contribution to the translation exposure of its parent on January 1st? $U (Round to the nearest peso Uruguayo.)
- Baxter, a US Company, has a 100% owned subsidiary in Japan. The functional currency for the subsidiary is the Japanese yen. The Japanese subsidiary purchases merchandise on credit from a Swiss company, with payment due in US dollars. Between the date of purchase and the due date of the payable, the swiss franc strengthens against the US dollar and the Japanese yen weakens against the US dollar. What will be the result to Baxter. A) There will be a foreign exchange loss B) There will be no foreign exchange gain or loss C) There will be both a foreign exchange gain and loss D) Juno will need to enter into a hedge to reduce its foreign currency exposure E) There will be a foreign exchange gainExplain how a U.S. corporation could hedge net receivables in Malaysian ringgit with a forward contract. Explain how a U.S. corporation could hedge payables in Canadian dollars with a forward contract.On March 1, Laton Products (a U.S. firm) purchased manu-facturing inputs from a Mexican supplier for 20,000 pesos, payable on June 1. The exchange rate for pesos on March 1was $0.17. If the exchange rate increases to $0.19 on June 1,what amount of gain or loss would be reported by Latonrelated to the currency exchange?a. $400 gain.b. $200 loss.c. $400 loss.d. $200 gain.
