Reference no: EM132503962
Questions -
Q1. On May 20, when the exchange rate was $1.40/£, a U.S. company purchased merchandise from a U.K. supplier for £10,000 and paid for the merchandise on June 5, when the exchange rate was $1.38/£. On August 15, when the exchange rate was $1.23/€, the U.S. company sold the merchandise to a customer in Belgium at an invoice price of €16,000. On September 6, when the exchange rate was $1.21/€, the U.S. company received payment of €16,000 from the Belgian customer. The U.S. company's accounting year ends December 31. What amount does the U.S. company report as cost of goods sold?
A. $12,300
B. $14,000
C. $10,000
D. $13,800
Q2. On November 1, 2020, a U.S. company invests in a forward purchase contract for delivery of 1,000,000 Singapore dollars (S$) at $0.75/S$ on February 1, 2021. The spot rate on November 1 is $0.77/S$. At December 31, the end of the accounting year, the forward contract is still outstanding. The year-end spot rate is $0.73. The year-end forward rate for February 1 delivery of Singapore dollars is $0.735.
How is the forward contract reported on the U.S. company's year-end balance sheet?
A. $15,000 asset
B. $40,000 asset
C. $35,000 liability
D. $15,000 liability
Q3. A U.S. company purchases a 90-day certificate of deposit from a Singapore bank on May 15, when the spot rate is $0.72/S$. The certificate has a face value of S$100,000 and pays interest at an annual rate of 2 percent. On August 13, the certificate of deposit matures, and the company receives principal and interest of S$100,500 and records interest revenue on the investment. The spot rate on August 13 is $0.75/S$. The average spot rate for the period May 15 - August 13 is $0.73/S$. The company's accounting year ends December 31.
Interest income on the investment is reported at:
A. $360
B. $500
C. $365
D. $375
Q4. On November 30, 2020, a U.S. company purchased merchandise on credit from a Swiss supplier at an invoice price of CHF1,000, when the exchange rate was $1.05/CHF. On December 31, 2020, the company's year-end, the exchange rate was $1.045/CHF. On February 1, 2021, the company purchased the CHF1,000 for $1.048/CHF and paid the invoice. On March 15, 2021, when the exchange rate was $1.044, the company sold the merchandise to a U.S. customer for $2,000.
At what amount should the merchandise be reported on the U.S. company's December 31, 2020 balance sheet?
A. $1,045
B. $1,050
C. $1,048
D. $1,044
Q5. On November 30, 2019, a U.K. company, with a December 31 year-end, enters a forward purchase contract for €100,000 to be delivered for £0.75/€ on April 20, 2020. The contract hedges a forecasted purchase of equipment. At year-end, the forward rate for delivery on April 20 is £0.77/€. The forward is closed, and the equipment purchased on April 20, when the spot rate is £0.78/€. The company follows IFRS.
Assuming no residual value, total depreciation expense over the life of the equipment is:
A. £75,000
B. £72,000
C. £78,000
D. £74,000
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