1. If $1.5625 can be exchanged for 1 British pound, the direct and indirect exchange rate quotations are:
a $1.5625 and 1 British pound, respectively
b $1.5625 and 0.64 British pounds, respectively
c $1.00 and 1.5625 British pounds, respectively
d $1.00 and 0.64 British pounds, respectively
2. A U.S. firm purchases merchandise from a Canadian firm with payment due in 60 days and denominated in Canadian dollars. The U.S. firm will report an exchange gain or loss on settlement if the transaction is:
a Recorded in U.S. dollars
b Measured in U.S. dollars
c Not hedged through a forward contract
d Settled after an exchange rate change has occurred
3. Exchange gains and losses on accounts receivable and payable that are denominated in a foreign currency are:
a Accumulated and reported upon settlement
b Deferred and treated as transaction price adjustments
c Reported as equity adjustments from translation
d Recognized in the periods in which exchange rates change
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