Question 1

On July 1, 2012, CDN purchased inventory from its main U.S. supplier, RNB Enterprises, at a cost of US$1,000. CDN's year end is on July 31. Some important dates regarding this transaction, as well as the exchange rates in effect at each of these dates are shown below:  What was the cost to CDN of the amount paid to RNB on the settlement date?

Accepted Answer

A

Question 2

The average rates in effect for 2010 and 2011 were as follows:  What is the amount of interest paid (in Canadian Dollars) during 2010?

Accepted Answer

B

Question 3

Accepted Answer

D

Question 4

Accepted Answer

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Question 5

At what value would CMI record the initial sale to its American distributor?

Accepted Answer

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Question 6

Accepted Answer

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Question 7

The rate charged by commercial banks for the purchase of any foreign currency (in Canadian dollars) on any given day would be based on which of the following?

Accepted Answer

Commercial banks typically use the spot rate as the basis for the exchange rate they charge for the purchase of foreign currency in Canadian dollars. The spot rate is the current market rate for a currency pair and is determined by supply and demand factors in the market. The other options (average rate, closing rate, forward rate) are not directly relevant to the current market conditions and are not typically used by banks for determining exchange rates.

Question 8

Accepted Answer

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Question 9

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Question 10

Which of the following is NOT currently a cause of fluctuation in foreign exchange rates?

Accepted Answer

The pegging of a currency to the American (U.S.) dollar is a fixed exchange rate and does not cause fluctuations in foreign exchange rates. It keeps the exchange rate stable as it is fixed to the value of the U.S. dollar. In contrast, inflation rates, interest rates, and trade surpluses and deficits all affect the demand and supply of a currency and can cause fluctuations in foreign exchange rates.

Question 11

Accepted Answer

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Question 12

Accepted Answer

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Question 13

Which of the following statements is correct?

Accepted Answer

The historical rate is the exchange rate at the date of the transaction and is used to record the transaction in the financial statements. The closing rate, on the other hand, is the exchange rate at the end of the reporting period and is used to convert foreign currency balances into the reporting currency for the balance sheet and income statement presentation.

Question 14

Which of the following statements is correct?

Accepted Answer

In Canada, the cost of a unit of foreign currency in Canadian dollars is a direct quotation. This means that the cost is quoted in terms of the number of Canadian dollars required to purchase one unit of foreign currency.

On the other hand, the cost in that foreign currency of purchasing one Canadian dollar is referred to as an indirect quotation. This means that the cost is quoted in terms of the amount of foreign currency required to purchase one Canadian dollar.

Therefore, option A is the correct statement.

Question 15

At the balance sheet date, monetary items denominated in a foreign currency should be adjusted to reflect the exchange rate in effect at the:

Accepted Answer

According to the accounting standard IAS 21, monetary items denominated in a foreign currency should be adjusted to reflect the exchange rate in effect at the balance sheet date. This is because the balance sheet provides a snapshot of the financial position of the business at a particular point in time, and therefore the exchange rate at the balance sheet date is the most relevant to use for translation of foreign currency transactions.

Question 16

What is the amount of CMI's foreign exchange gain or loss at year-end?

Accepted Answer

The answer of   What is the amount of...

Question 17

The average rates in effect for 2010 and 2011 were as follows:  At what amount (in Canadian Dollars) would XYZ record its initial Loan Liability on January 1, 2010?

Accepted Answer

The answer of   The average rates in effect...

Question 18

Accepted Answer

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Question 19

On July 1, 2012, CDN purchased inventory from its main U.S. supplier, RNB Enterprises, at a cost of US$1,000. CDN's year end is on July 31. Some important dates regarding this transaction, as well as the exchange rates in effect at each of these dates are shown below:  At what amount would CDN record its inventory purchase from RNB at the time of purchase?

Accepted Answer

The answer of On July 1, 2012, CDN purchased inventory...

Question 20

The average rates in effect for 2010 and 2011 were as follows:  What is the amount of interest expense (in Canadian Dollars) recorded for 2010?

Accepted Answer

The answer of   The average rates in effect...

Quiz 10: Foreign Currency Transactions

The average rates in effect for 2010 and 2011 were as follows: What is the amount of interest paid (in Canadian Dollars) during 2010?

At what value would CMI record the initial sale to its American distributor?

The rate charged by commercial banks for the purchase of any foreign currency (in Canadian dollars) on any given day would be based on which of the following?

Which of the following is NOT currently a cause of fluctuation in foreign exchange rates?

Which of the following statements is correct?

Which of the following statements is correct?

At the balance sheet date, monetary items denominated in a foreign currency should be adjusted to reflect the exchange rate in effect at the:

What is the amount of CMI's foreign exchange gain or loss at year-end?

The average rates in effect for 2010 and 2011 were as follows: At what amount (in Canadian Dollars) would XYZ record its initial Loan Liability on January 1, 2010?

The average rates in effect for 2010 and 2011 were as follows: What is the amount of interest expense (in Canadian Dollars) recorded for 2010?