Advanced Financial Accounting 8th Edition By Baker – Test Bank

Chapter 11 Multinational Accounting: Foreign Currency Transactions and Financial Instruments Answer Key

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Chapter 11 – Multinational Accounting: Foreign Currency Transactions and Financial Instruments

Multiple Choice Questions

1. If 1 British pound can be exchanged for 180 cents of U.S. currency, what fraction should be used to compute the indirect quotation of the exchange rate expressed in British pounds?

A. 1/180 B. 1/.56 C. 1.8/1 D. 1/1.8

AACSB: Analytic
AICPA: Measurement

Suppose the direct foreign exchange rates in U.S. dollars are:

1 Singapore dollar = $.7025

1 Cyprus pound = $2.5132

2. Based on the information given above, the indirect exchange rates for the Singapore dollar and the Cyprus Pound are:

A. 1.7655 Singapore dollars and 1.4235 Cyprus pounds respectively. B. 0.2975 Singapore dollars and 1.5132 Cyprus pounds respectively. C. 2.1622 Singapore dollars and 0.4625 Cyprus pounds respectively. D. 1.4235 Singapore dollars and 0.3979 Cyprus pounds respectively.

AACSB: Analytic

AICPA: Measurement

3. Based on the information given above, how many U.S. dollars must be paid for a purchase of citrus fruits costing 10,000 Cyprus pounds?

A. $25,132 B. $15,132 C. $3,979 D. $35,775

AACSB: Analytic

AICPA: Measurement

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Chapter 11 – Multinational Accounting: Foreign Currency Transactions and Financial Instruments

4. Based on the information given above, how many Singapore dollars are required to purchase goods costing 10,000 US dollars?

A. 7,025 B. 14,235 C. 17,655 D. 2,975

AACSB: Analytic

AICPA: Measurement

5. Upon arrival in Chile, Karen exchanged $1,000 of U.S. currency into 4,80,000 Chilean Pesos. While returning after her two month visit, she exchanged her remaining 50,000 Pesos into $100 of U.S. currency. What amount of gain or a loss did Karen experience on the 50,000 pesos she held during her visit and converted to U.S. dollars at the departure date?

A. Loss of $4. B. Gain of $4. C. Loss of $6.

D. No gain or loss.

AACSB: Analytic

AICPA: Measurement

6. Chicago based Corporation X has a number of importing transactions with companies based in UK. Importing activities result in payables. If the settlement currency is the British Pound, which of the following will happen by changes in the direct or indirect exchange rates?

A. Option A
B. Option B
C. Option C
D. Option D

7. Chicago based Corporation X has a number of exporting transactions with companies based in Sweden. Exporting activities result in receivables. If the settlement currency is the Swedish Krona, which of the following will happen by changes in the direct or indirect exchange rates?

A. Option A
B. Option B
C. Option C
D. Option D