Exam 15: Global Business and Accounting

Having a liability that is fixed in terms of a foreign currency results in a loss for the debtor if the exchange rate falls between the transaction date and the payment date.

An increase in the exchange rate between a transaction date and the date of payment will cause the debtor to incur a loss.

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.

Differentiate between Adoption and Convergence as related to International Financial Reporting Standards.

Gains and losses from fluctuations in exchange rates should be shown on the:

Explain the major provisions of the Foreign Corrupt Practices Act as amended in 1986.

The statement that "the yen has fallen against the dollar" means that the yen has become less valuable relative to the dollar.

Future contracts are used by companies to hedge against losses in foreign currencies.

Hayden,Inc.purchased knobs from a Greek company for 185,000 Euros.On the purchase date the exchange rate was $0.80 per Euro,but when Hayden paid the liability,the exchange rate was $0.70 per Euro.When this foreign account payable was paid,Hayden,Inc.,recorded a:

A wholly owned international subsidiary exists when a company owns 100% equity control of a foreign subsidiary.

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:

Low individualism and high long-term orientation is indicative of which culture?

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?

In a planned economy,the government uses central planning to allocate resources and determines output among various segments of the economy.

When the government uses central planning to allocate resources and to determine output among various segments of the economy,this is known as:

A company has a "hedged position" when it has similar amounts of accounts receivable and accounts payable in the same foreign currency.

Importing transactions-journal entries Striking Furs imports furs from Canada.In the space provided below,prepare journal entries to record the following events. Dec.11,2014: 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.31,2014: 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.9,2015: 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.

An American corporation making purchases from foreign companies will experience gains and losses from exchange rate fluctuations if (a)the purchase prices are stated in terms of the foreign currency and (b)the purchases are made on account.

In a planned economy,ownership of land and the means of production are private and markets dictate the allocation of resources and the output among segments of the economy.

A dollar that is stronger than the British pound would make travel to the United States more attractive to British citizens.