On November 14,2014,Scuby Company (a U.S.corporation)enters into a transaction which is denominated in the Canadian dollar.Assume the exchange rate at November 14 is $1.03,and at the December 31 year-end reporting date,the exchange rate is $1.07.On January 27,2015,when the transaction is settled,the exchange rate is $1.05.At the date of settlement,which of the following is correct?
A)The historical rate = $1.05,and the spot rate at which it is settled is the same as the current rate at $1.07.
B)The historical rate = $1.03,and the spot rate at which it is settled is the same as the current rate at $1.06.
C)The historical rate = $1.05,the current rate for reporting at December 31,2014 is $1.07,and the spot rate at which it is settled is $1.03.
D)The historical rate = $1.03,the current rate for reporting at December 31,2014 is $1.07,and the spot rate at which it is settled is $1.05.

Question

Quizplus · Accepted Answer

The historical rate is the exchange rate on the date the transaction was entered into, which is $1.03. The current rate for reporting purposes at the year-end date (December 31, 2014) is $1.07. The spot rate at settlement (January 27, 2015) is the exchange rate on the date the transaction is settled, which is $1.05.

On November 14,2014,Scuby Company (A U