Question 1

Blue Waters is an American company that does business with several Japanese corporations.In recent months,Blue Waters has been reporting losses from increases in the exchange rate of the Japanese yen.The majority of Blue Waters transactions with the Japanese companies probably consist of:

Accepted Answer

If Blue Waters is reporting losses due to an increase in the exchange rate of the Japanese yen, it suggests that they are incurring losses on credit purchases made in Japanese yen. Therefore, the best choice is D.

Question 2

Assume the exchange rate for the Mexican peso is falling relative to the U.S.dollar.An American company will incur losses from this falling exchange rate if the company is making:

Accepted Answer

When the exchange rate for the Mexican peso is falling relative to the U.S. dollar, it means that the peso is depreciating. If an American company is making credit sales to Mexican companies at prices stated in Mexican pesos, when it converts those sales back into U.S. dollars, it will receive fewer dollars for the same amount of pesos, leading to losses.

Question 3

Samson Corporation buys a foreign currency future contract as a hedging strategy to protect against possible losses from fluctuations in a particular foreign exchange.This strategy suggests that Samson Corporation has:

Accepted Answer

Since Samson Corporation has foreign accounts payable, it is exposed to losses from a potential rise in the foreign exchange rate. By purchasing a foreign currency futures contract, Samson can lock in an exchange rate and protect against potential losses from a possible rise in the exchange rate.

Question 4

On November 1,a French company purchased machinery from an American company for 800,000 euros when the exchange rate was $0.83.When preparing financial statements on December 31,assuming the rate for euros was $0.88,what amount of gain or loss should the American company report?

Accepted Answer

The American company would report a $40,000 gain because the value of the euros received for the machinery increased from the time of sale ($0.83) to the time of preparing financial statements ($0.88). The calculation is as follows: (800,000 euros * $0.88) - (800,000 euros * $0.83) = $704,000 - $664,000 = $40,000 gain.

Question 5

Under the Foreign Corrupt Practices Act,American business firms are required to:

Accepted Answer

Under the Foreign Corrupt Practices Act, American business firms are required to maintain an adequate system of internal control limiting access to company assets to authorized personnel. This is to prevent bribery and corruption within the company. The other options are not requirements under the act.

Question 6

Exporting transactions-journal entries
Jung Farms exports wheat to Germany.In the space provided below,prepare journal entries to record the following events.
Nov.15,2017: Sold wheat to a German restaurant chain at a price of 2 million euros,due in 90 days.The current exchange rate is $0.80 U.S.dollars per euro.(Jung uses the periodic inventory method. )
Dec.31,2017: Jung made a year-end adjusting entry relating to the account receivable from the German restaurant chain.The exchange rate at year-end is $0.85 U.S.dollars per euro.
Feb.15,2018: Received a check for $1,640,000 from the InterContinental Bank in full settlement of the receivable from the German restaurant chain.The exchange rate at this date is $0.82 U.S.dollars per euro.

Accepted Answer

The answer of Exporting transactions-journal entries
Jung Farms exports wheat to...

Question 7

A contract giving the right to receive a specified quantity of foreign currency at a future date is known as a:

Accepted Answer

A contract giving the right to receive a specified quantity of foreign currency at a future date is known as a futures contract, also sometimes referred to as a forward contract. This is different from a hedging contract, which is a financial instrument used to mitigate risk, and a specified contract, which is not a commonly used term in finance. A foreign contract is also not a widely recognized term in finance.

Question 8

The Foreign Corrupt Practices Act (FCPA)affects all of the following except:

Accepted Answer

The Foreign Corrupt Practices Act (FCPA) applies to United States companies, foreign companies operating in the United States, and affiliates and agents of a United States company or a foreign company operating in the United States. However, it does not apply to foreign companies that operate solely in their home country.

Question 9

Foreign currency transactions
The following table summarizes the facts of five independent cases (labeled a through e)of American companies engaging in credit transactions with foreign corporations while the foreign exchange rate is fluctuating:  Instructions:
After evaluating the information about each case,fill the blank space that has been left in one of the four columns.
The content of each column and the word or words that you should enter in the blank spaces are described below:
Column 1 indicates the type of credit transaction in which the American company engaged with the foreign corporations.The answer entered in this column should be either "Sales" or "Purchases."
Column 2 indicates the currency in which the invoice price is stated.The answer may be either "U.S.dollars" or "Foreign currency."
Column 3 indicates the direction in which the foreign currency exchange rate has moved between the date of the credit transaction and the date of settlement.The answer in this column may be either "Rising" or "Falling."
Column 4 indicates the effect of the exchange rate fluctuation upon the income of the American company.The answers entered in this column are to be selected from the following: "Gain," "Loss," or "No effect."

Accepted Answer

The answer of Foreign currency transactions
The following table summarizes the...

Question 10

Trente Switch and Signal sold equipment to a Canadian transportation company at a price of 300,000 Canadian dollars with payment due in 60 days.On the date of sale,the exchange rate was 1.50 Canadian dollars per U.S.dollar.Trente decided to hedge the risk of currency fluctuations by purchasing 300,000 Canadian dollars with payment due in 60 days.If the exchange rate in 60 days is 1.25 Canadian dollars per U.S.dollar,Trente Switch and Signal will:

Accepted Answer

The company will gain from the receivable due to the stronger Canadian dollar (receiving more USD) but will lose the same amount when paying for the Canadian dollars it purchased due to the same exchange rate change.

Question 11

Accounting terminology
Listed below are nine technical accounting terms introduced in this chapter:  Each of the following statements may (or may not)describe one of these technical terms.In the space provided below each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms.
________ (a)The strategy of creating offsetting positions so that losses from currency fluctuations will be offset by gains resulting from the same fluctuations.
________ (b)The price of foreign currency,stated in terms of the domestic currency.
________ (c)An item likely to appear in the income statements of American-based importers when foreign exchange rates are rising.
________ (d)The organization responsible for developing uniform worldwide accounting standards.
________ (e)Payments made to foreign officials to expedite paperwork.
________ (f)The process of restating an amount of foreign currency in terms of the equivalent number of U.S.dollars.
________ (g)An item likely to appear in the income statements of American-based exporters when foreign exchange rates are falling.

Accepted Answer

The answer of Accounting terminology
Listed below are nine technical accounting...

Question 12

A corporation that uses a strategy of hedging all contracts specifying a foreign currency (i.e.foreign accounts receivable and foreign accounts payable):

Accepted Answer

By hedging all contracts specifying a foreign currency, the corporation is able to avoid net losses from fluctuations in foreign exchange rates. The hedging strategy involves taking positions in the market that offset potential losses, thereby protecting the corporation from adverse movements in currency rates. While this strategy may not always result in gains, it does provide a level of certainty and stability in the face of currency risks.

Question 13

Listed below are several terms and statements with missing expressions.Fill in the blanks with the appropriate term.
  (1)To convert a foreign currency to an equivalent dollar amount,________ the foreign currency by the foreign exchange rate.
(2)To convert a dollar amount into an equivalent amount of foreign currency,________ the dollar amount by the exchange rate.
(3)The ________ prohibits companies engaged in global activities from bribing officials of foreign countries.
(4)Goods imported into ________ are duty free.
(5)________ minimizes or eliminates the risk of loss associated with foreign currency fluctuations.
(6)In a ________,ownership of land and the means of production are privately held.
(7)In a ________,the government allocates resources and determines output among various segments of the economy.
(8)The process of restating an amount of foreign currency in terms of the equivalent number of dollars is called ________ the foreign currency.
(9)A currency is described as ________ when its exchange rate is rising relative to other currencies.
(10)A currency is described as ________ when its exchange rate is falling in relation to other currencies.

Accepted Answer

The answer of Listed below are several terms and statements...

Question 14

Of the following globalization strategies,which would be least demanding in terms of the quantity and variety of accounting information required?

Accepted Answer

Exporting involves selling products or services to foreign markets without establishing a physical presence in the foreign country. Since this strategy doesn't involve setting up operations in a foreign country, it requires the least amount of accounting information compared to other strategies like joint ventures or establishing a wholly owned foreign subsidiary.

Question 15

Importing transactions-journal entries
Striking Furs imports furs from Canada.In the space provided below,prepare journal entries to record the following events.
Dec.11,2017: Purchased furs from Capable Trappers,Ltd. ,a Canadian corporation,at a price of 25,000 Canadian dollars,due in 60 days.The current exchange rate is $0.85 U.S.dollars per Canadian dollar.(Striking uses the perpetual inventory method;debit the Inventory account. )
Dec.31,2017: Striking made a year-end adjusting entry relating to the account payable to Capable Trappers.The exchange rate at year-end is $0.89 U.S.dollars per Canadian dollar.
Feb.9,2018: Issued a check for $21,750 (U.S.dollars)to National Bank in full settlement of the liability to Capable Trappers,Ltd.The exchange rate at this date is $0.87 U.S.dollars per Canadian dollar.

Accepted Answer

The answer of Importing transactions-journal entries
Striking Furs imports furs from...

Question 16

The Foreign Corrupt Practices Act (FCPA)imposes ________ for managers who engage in bribes.

Accepted Answer

The FCPA imposes fines and other penalties, such as imprisonment, for managers who engage in bribes. Deportation and quotas are not penalties under the FCPA, and taxes are not directly related to violations of the FCPA.

Question 17

Exchange rates and hedging
On October 1 2018,Glenn Company accepted a shipment of beer from Germany.The purchase contract specifies payment of 3,000,000 euros is to be made on December 1,2018.The exchange rate on October 1,2018 was: $1 = 1.4 euros.
Instructions:
(a)If the exchange rate on December 1 2018 is: $1 = 1.18 euros,what amount of gain or loss due to the exchange rate fluctuation will be recognized on the purchase?
(b)On October 1,Glenn's analysts were forecasting the exchange rate to be: $1 = 1.20 euros on December 1,2018.Glenn can enter into a hedging contract on October 1,2018 whereby the bank would accept $2,480,000 in exchange for 3,000,000 euros on December 1.The bank will charge a $2,000 fee to enter into the agreement.Should Glenn enter into the hedge agreement?
(c)If Glenn enters into the hedging contract,what will be the exchange gain/loss recorded on December 1,2018? (Do not round your intermediate computations,but rather round the final answers to nearest whole dollar. )

Accepted Answer

The answer of Exchange rates and hedging
On October 1 2018,Glenn...

Question 18

Which of the following does not affect the cost associated with producing and selling goods and services in global markets?

Accepted Answer

Sales or use tax rates in the United States are a domestic tax and do not affect the cost associated with producing and selling goods and services in global markets. Tariffs, duties, and special trade zones all have an impact on international trade and can increase the cost of doing business in global markets.

Question 19

Assume the exchange rate for the Canadian dollar is rising relative to the U.S.dollar.An American company will incur losses from this rising exchange rate if it is making:

Accepted Answer

The answer of Assume the exchange rate for the Canadian...

Question 20

Prepare journal entries for the following transactions for Inter-Global Co.
October 10: Purchased merchandise on account from Le Monde,a French company,for 80,000 euros.The exchange rate was $0.82.
November 2: Paid Le Monde for the merchandise purchased on October 1.The exchange rate at this date was $0.83.
November 15: Sold merchandise to Nippon,a Japanese company for 300,000 yen on account.The rate of exchange was $0.0091.
November 20: The Japanese company paid the full amount.The exchange rate was $0.0090.
December 5: Sold merchandise to Ponti,an Italian company for $24,000.The exchange rate is $0.81.The Italian company agrees to pay in U.S.dollars.
December 18: Collected the full amount from the Italian company when the exchange rate is $0.82.

Accepted Answer

The answer of Prepare journal entries for the following transactions...

Quiz 15: Global Business and Accounting