# multiple choice questions 1 on may 1 2011 deerfield corporation purchased merchandis 4307550

Multiple Choice Questions

1) On May 1, 2011, Deerfield Corporation purchased merchandise from a German firm for 78,000 euros when the spot rate for the euro was 1.48 euro per dollar. The account payable was denominated in the euro. Deerfield settled the account on August 1 when the spot rate for the euro was 1.39 euro per dollar. How much cash will Deerfield have to disburse to settle the account?

A) \$ 52,702.72

B) \$ 56,115.11

C) \$108,420.00

D) \$115,440.00

2) Cass Corporation's balance sheet at December 31, 2011 included a \$48,480 account receivable from Redmun Corporation of Mexico. The account receivable was denominated as 600,000 Mexican pesos. What entry did Cass make on January 16, 2012 when the account receivable was collected and the exchange rate for the peso was \$.09?

A)

 Cash 54,000 Accounts Receivable 54,000

B)

 Cash 54,000 Exchange Gain 5,520 Accounts Receivable 48,480

C)

 Cash 48,480 Accounts Receivable 48,480

D)

 Cash 48,480 Exchange Loss 5,520 Accounts Receivable 54,000

3) The exchange rates between the Australian dollar and the U.S. dollar were as follows:

Jun 11\$AUS = \$.8328US

Jul 11\$AUS = \$.8356US

Aug 11\$AUS = \$.9111US

This chart shows a

A) strengthening Australian Dollar which makes it less expensive for Americans to buy Australian goods.

B) weakening Australian dollar which makes it less expensive for Americans to buy Australian goods.

C) strengthening Australian dollar which makes it more expensive for Americans to buy Australian goods.

D) weakening Australian dollar which makes it more expensive for Americans to buy Australian goods.

4) With respect to exchange rates, which of the following statements is true?

A) An official exchange rate is the “market” rate resulting from the supply and demand for a currency.

B) A floating exchange rate is the “market” rate resulting from the supply and demand for a currency.

C) A government cannot set an exchange rate for their currency that is higher (weakens their currency) than the quoted interbank market rate.

D) A government cannot set an exchange rate for their currency that is lower (strengthens their currency) than the quoted interbank market rate.

5) A U.S. importer that purchased merchandise from a South Korean firm would be exposed to a net exchange gain on the unpaid balance if the

A) dollar weakened relative to the Korean won and the won was the denominated currency.

B) dollar weakened relative to the Korean won and the dollar was the denominated currency.

C) dollar strengthened relative to the Korean won and the won was the denominated currency.

D) dollar strengthened relative to the Korean won and the dollar was the denominated currency.

6) If the sale of the merchandise was denominated in Swiss francs, the November 30 entry to record the receipt of payment from Watchem included a

A) credit to Accounts Receivable for \$104,040.

B) credit to Exchange Gain for \$3,060.

C) debit to Cash for \$107,100.

D) debit to Exchange Loss for \$3,060.

7) If the sale of merchandise is denominated in dollars, the November 30 entry to record receipt of the payment from Watchem included a

A) credit to Accounts Receivable for \$104,040.

B) credit to Exchange Gain for \$3,060.

C) debit to Cash for \$107,100.

D) debit to Exchange Loss for \$3,060.

8) On December 5, 2010, Unca Corporation, a U.S. firm, bought inventory items from Skagerrak Corporation of Norway for 1,000,000 Norwegian kroner when the spot rate for kroner was \$0.166. The purchase was denominated in kroner. At Unca's fiscal year end, December 31, 2010, the spot rate was \$0.171. On January 4, 2011, Unca purchased 1,000,000 kroner for \$167,500 and paid the invoice. How much gain or (loss) did Unca report in its 2010 and 2011 income statements, respectively?

A) \$(5,000) and \$1,500

B) \$0 and (\$1,500)

C) (\$5,000) and \$3,500

D) \$0 and (\$3,500)

9) What exchange gain or loss appeared on Sooty's 2010 income statement?

A) a loss of \$10,000

B) a loss of \$15,000

C) a gain of \$10,000

D) a gain of \$15,000

10) What is the final amount of the loan payable that Sooty repaid?

A) \$250,000

B) \$287,500

C) \$397,500

D) \$402,500

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Regards,

Cathy, CS.