P. 1
NPO Midterm

NPO Midterm

|Views: 115|Likes:

More info:

Published by: Patrick Ferdinand Alvarez on Feb 14, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less

11/04/2012

pdf

text

original

UNIVERSITY OF LA SALETTE ± College of Accountancy NPO Midterm Examination Multiple Choice. Strictly NO ERASURES. 1.

Levin company entered into a forward contract to speculate in the foreign currency. It sold 100,000 foreign currency units under a contract dated November 1, 2008, for delivery on January 31, 2009:

In its income statement for the year ended December 31, 2008, what amount of loss should Levin report from this forward contract? A. $0 B. $300 C. $200 D. $100 Taste Bits Inc. purchased chocolates from Switzerland for 200,000 Swiss francs (SFr) on December 1, 2008. Payment is due on January 30, 2009. On December 1, 2008, the company also entered into a 60-day forward contract to purchase 100,000 Swiss francs. The forward contract is not designated as a hedge. The rates were as follows:

2. Based on the preceding information, the entries on December 31, 2008, include a: A. Credit to Foreign Currency Payable to Exchange Broker, $4,000. B. Debit to Foreign Currency Receivable from Exchange Broker, $6,000. C. Debit to Foreign Currency Receivable from Exchange Broker, $186,000. D. Debit to Foreign Currency Transaction Gain, $4,000.

3. Based on the preceding information, the entries on January 30, 2009, include a: A. Debit to Dollars Payable to Exchange Broker, $180,000. B. Credit to Cash, $184,000. C. Credit to Premium on Forward Contract, $4,000. D. Credit to Foreign Currency Receivable from Exchange Broker, $180,000. 4. Based on the preceding information, the entries on January 30, 2009, include a: A. Credit to Foreign Currency Units (SFr), $184,000. B. Credit to Cash, $180,000. C. Debit to Foreign Currency Transaction Loss, $4,000. D. Debit to Dollars Payable to Exchange Broker, $184,000. 5. Based on the preceding information, the entries on January 30, 2009, include a: A. Debit to Dollars Payable to Exchange Broker, $184,000. B. Credit to Foreign Currency Transaction Gain, $4,000. C. Credit to Foreign Currency Receivable from Exchange Broker, $180,000. D. Debit to Foreign Currency Units (SFr), $184,000.

what is the overall effect of speculation on 2008 net income? A.78.000 gain C. what is the effect of the euro speculative contract on 2009 net income? A.000 loss D. $8.000 loss D.000 loss .000 gain B. Based on the preceding information.000 loss B.000 gain 8.000 loss 7. $3. what is the net gain or loss on the British pound speculative contract? A.000 loss D. $3. $10.000 British pounds (£) at a forward rate of £1 = $1. The rates are as follows: Hedge had no other speculation transactions in 2008 and 2009. $3. $10.000 gain D.000 gain 10. Based on the preceding information.On December 1.000 gain C. $6. $1. Based on the preceding information. Based on the preceding information.000 gain B. what is the net gain or loss on the euro speculative contract? A.42.000 gain B. $8. $4.000 loss 9. $8. Based on the preceding information.000 gain B. $2. Hedge Company entered into a 60-day speculative forward contract to sell 200.000 loss B. $6. $6. $6. 2008.000 gain D. $1. what is the overall effect of speculation on 2009 net income? A. $8.000 gain C.000 gain C.000 gain C. $8.000 loss D. $8.000 gain C.000 gain 11. $2. Ignore taxes. what is the effect of the British pound speculative contract on 2008 net income? A. $8. $4. $1. On the same day it purchased a 60-day speculative forward contract to buy 100. $6.000 euros (¼) at a forward rate of ¼1 = $1. Based on the preceding information. 6.

Company X issues variable-rate debt but wishes to fix its interest rates because it believes the variable rate may increase. above $100. a swap. B. below $100. 15. Substantial margin is required to initiate a contract. Which of the following observations is true of forwards contracts? A. The two companies agree to exchange cash flows. AMAR sells the oil for $112 per barrel. 2009. B. This option is considered "in the money" if the underlying is trading: A. AMAR sells the options at their value on that date and acquires 20. Based on the preceding information.000 barrels of oil at $100 per barrel at a premium of $4 per barrel. the call option: A. Contracted through a dealer. D. an option. D. C. is out of the money. call date. 17. D. Traded on an exchange and acquired through an exchange broker 16. cash settlement. C. at $100. with a February 1. Customized to meet contracting company's terms and needs. B. C. Usually settled with a net cash amount prior to maturity date. An investor purchases a put option with a strike price of $100 for $3. is at the money. C. 12. 14. . On April 1. Such an arrangement is called: A. B. On November 30. D. Based on the preceding information. B. when the stock is trading at $48. 13. The following is the pricing information for the term of the call: The information for the change in the fair value of the options follows: On February 1. above $103. Must be completed either with the underlying's future delivery or net C. Cannot be customized. is in the money. which of the following is true of the intrinsic and time values associated with this option. E. a forward contract. 2009.000 barrels of oil at the spot price. usually a bank. AMAR purchases call options for 20. for a specific amount at a specific date. Spiralling crude oil prices prompted AMAR Company to purchase call options on oil as a price-risk-hedging device to hedge the expected increase in prices on an anticipated purchase of oil.The fair market value of a near-month call option with a strike price of $45 is $5. a futures contract. Company Y has a fixed-rate bond but is looking for a variable-rate interest because it assumes the interest rates may decrease. 2009. 2008. Which of the following observations is true of futures contracts? A. Typically no margin deposit required. has no intrinsic value currently. D.

000. 2008? 19. 2009? Problem Solving. 2009? Overall for this transaction? . D. 2008? For the year ended December 31. Quantum Company imports goods from different countries. 20. were: The average exchange rates during the collection and payment period in 2009 are: Required: 1) Prepare the adjusting entries on December 31.000. Based on the preceding information. in the entry to record the increase in the intrinsic value of the options on December 31. C. 2) Record the collection of the accounts receivable and the payment of the accounts payable in 2009. which of the following adjusting entries would be required on December 31.S. which of the following entries will be required on February 1.000. Based on the preceding information. Purchased Call Options will be credited for $100. Purchased Call Options will be debited for $130.18. 2008. dollars and others in foreign currencies. B. 2008. Retained Earnings will be credited for $100. Based on the preceding information. 2008. follows: The spot rates on December 31. Other Comprehensive Income will be credited for $100. 3) What was the foreign currency gain or loss on the accounts receivable transaction denominated in SFr for the year ended December 31. A summary of accounts receivable and accounts payable on December 31. Some transactions are denominated in U. A. before adjustments for the effects of changes in exchange rates during 2008. 2009? Overall for this transaction? 4) What was the foreign currency gain or loss on the accounts receivable transaction denominated in ¥? For the year ended December 31. 1. 2008? For the year ended December 31.000. 2008.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->