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1. If a US company has net cash outflows in a foreign currency, which of the following is false?
(A) The US company would benefit from a drop-in value of the foreign currency.
(B) The US company would benefit from an increase in value of the foreign currency.
(C) The US company would suffer a loss from a decrease in value of the foreign currency.
(D) The appreciation or depreciation of the foreign currency would be irrelevant.
.........

2 A US firm that has cash flows in a foreign currency will have an economic GAIN if

I. the foreign currency appreciates, and the US firm has net cash inflows

II. the US firm has net cash outflows and the foreign currency depreciates

(A) I only

(B) II only

(C) Both I and II

(D) Neither I nor II

.......

3. The decision to exercise a call option would be based on

I. strike price

II. call premium

III. market price of the underlying security

(A) I and II

(B) II and III

(C) II only

(D) I only

................

4. Which of the following is FALSE regarding the US dollar?

(A) A strong US dollar makes domestic goods relatively more expensive than imported goods.

(B) A strong US dollar is better for a US company than a weak US dollar.

(C) A weak US dollar makes imported goods relatively cheaper than domestic goods.

(D) A weak US dollar makes domestic goods more expensive than

imported goods.

............

5. Wright International is a US firm that typically exports goods to Japan. Since the international receivables are denominated in yen, they are subject to fluctuating currency rates. To mitigate chis risk, Wright sometimes purchases put options to protect against loss from a decline in the yen. The put premium is relevant to the

I. decision to exercise the option

II. calculation of gain or loss on the exercise of the put option

(A) I only

(B) II only

(C) Both I and II

(D) Neither I nor II

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Casey Durgan
Casey DurganLv2
29 Sep 2019

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Requirement 1.

Which of the following items requires a prior period adjustment to accumulated other comprehensive income?

I. Available-for-sale securities were improperly valued last year by $3 million.
II. The prior year’s foreign currency translation gain of $1.5 million was never recorded.
III. Revenue of $4 million that should have been deferred was recorded in previous year as earned.


a. I, II, and III

b. I and II only

c. I and II only

d. II and III only

Requirement 2.

Choose the correct statement(s) regarding changes in accounting estimates:

I. Changes in accounting estimates generally result from the availability of new information.
II. Disclosure of current period effects is generally required for changes in estimate.
III. A change in accounting principle that is inseparable from a change in estimate is accounted for prospectively, but with footnote disclosure of retrospective effects.

a. I only.

b. I and II only.

c. III only.

d. II and III only.


Santa Barbara​ Company, a U.S.​ company, purchased merchandise onaccount from a company in England. The price was 1,200 Britishpounds. At the time of the​ purchase, the exchange rate for aBritish pound was $ 1.53. At the time Santa Barbara Company paidfor the​ merchandise, the exchange rate for a British pound was$1.57. What is the amount of the gain or loss recorded by the SantaBarbara Company upon​ payment?
A.)Foreign currency transaction loss $48.
B.)Foreign currency transaction gain $ 48
C.)Foreign currency translation loss $1,884.
D.) Foreign currency translation gain $1,884.
Wendell Corporation reported net income for the current year of$840,000. Wendell had 5,000 shares of $120 par​ value,9​% preferred stock outstanding and 39,000 shares of​$1 par value common stock outstanding for the entire year. Earningsper share​ is
A.)$21.54
B.)$20.15
C.)$17.86
D.) $120.00


The Playscape Company reports the following for the fiscal yearending December​ 31, 2017:

Net income $900,000
​Foreign-Currency Translation​ Gain, net of tax $200,000
Unrealized Loss on Investment in​ Available-for-Sale Securities,net of tax (440,000​)
Unrealized Loss on Investment in Trading​ Securities, net of tax(120,000​)


What is comprehensive income for the fiscal year ending December​31, 2017?
A.)1,100,000
B.)540,000
C.)900,000
D.)660,000

Derivatives Statement No. 133 Accounting for Derivative Instruments and Hedging Activities establishes accounting and reporting standards for derivative instrument embedded in other contracts and for hedging activities. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statements of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as: (a) A hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. (b) A hedge of the exposure to variable cash flows of a forecasted transactions or (c) A hedge of the foreign currency exposure a net investment in a foreign operation, an unrecognized firm commitment, an available for sale security or a foreign currency denominated forecasted transactions. Requirements Review Statement No. 133 and evaluate the standard in terms of the conceptual framework. Define a derivative from an accounting perspective. Provide at least three characteristics of a derivative. Name and describe three derivatives. When was the implementation date of the statement? Briefly summarize the statement.

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