advanced accounting Chapter 11Solution Manual文档格式.docx

advanced accounting Chapter 11Solution Manual文档格式.docx

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FOREIGNCURRENCYTRANSACTIONSAND

FINANCIALINSTRUMENTS

ANSWERSTOQUESTIONS

Q11-1 

Indirectanddirectexchangeratesdifferbywhichcurrencyisdesiredtobeexpressedinanothercurrency.Anindirectexchangerateisthenumberofforeigncurrencyunitsthatmaybeobtainedforonelocalcurrencyunit.Theindirectexchangeratehastheforeigncurrencyunitinthenumerator.Asafraction,theindirectexchangerateisexpressedasfollows:

Numberofforeigncurrencyunits

Onelocalcurrencyunit

Adirectexchangerateisthenumberoflocalcurrencyunitsneededtoacquireoneforeigncurrencyunit.Thedirectexchangeratehasthelocalcurrencyunitsinthenumerator（theU.S.dollarforthedirectexchangeratefortheU.S.dollar）.Asafraction,thedirectexchangerateisexpressedasfollows:

Numberoflocalcurrencyunits

Oneforeigncurrencyunit

Theindirectanddirectexchangeratesareinverselyrelatedandbothstatethesamerelationshipbetweentwocurrencies.

Q11-2 

Thedirectexchangeratecanbecalculatedbytakingtheinverseoftheindirectexchangerate.Suchacomputationfollows:

=

C$1.3623（Canadiandollars）

$1.00（U.S.dollars）

Theinverseoftheindirectexchangerateis:

$1.00（U.S.dollars） 

C$1.36（Canadiandollars）

$0.7340

Q11-3 

WhentheU.S.dollarstrengthensagainsttheEuropeaneuro,importsfromEuropeintotheU.S.willbelessexpensiveinU.S.dollars.Thedirectexchangeratedecreases,indicatingthatittakesfewerdollarstoacquireEuropeaneuros.

Q11-4 

Aforeigntransactionisatransactionthatdoesnotinvolvetheexchangeofcurrenciesonthepartofthereportingentity.AnexampleofaforeigntransactionisthesaleofequipmentbyaU.S.company（thereportingentity）toaJapanesefirmthatisdenominatedinU.S.dollars.

Aforeigncurrencytransactionisatransactionthatdoesinvolvetheexchangeofcurrenciesonthepartofthereportingentity.AnexampleofaforeigncurrencytransactionisthesaleofequipmentbyaU.S.company（thereportingentity）toaJapanesefirmthatisdenominatedinJapaneseyen.

Q11-5 

Therearemanytypesofeconomicfactorsthataffectcurrencyexchangerates,amongwhicharethelevelofinflation,thebalanceofpayments,changesininterestratesandinvestmentlevels,andthestabilityandprocessofgovernance.OneexampleofaneconomicfactorthatresultsinaweakeningoftheU.S.dollarversustheEuropeaneuroisahigherlevelofinflationintheU.S.relativetotheinflationinEurope.

Q11-6 

AssetsandliabilitiesdenominatedinaforeigncurrencyaremeasuredaccordingtotherequirementsinFASB52（ASC830）forthosearisingfromnormalpurchaseandsaletransactions,andbyFASB133（ASC815）forforwardexchangecontractsandhedgingactivities.FASB52（ASC830）specifiesthatthevaluationatthetransactiondateandeachsubsequentbalancesheetdateshouldbeatthelocalcurrencyequivalentusingthespotrateofexchange.Forwardexchangecontractsarevaluedatfairvalue,typicallybyusingtheforwardratefortheremainderofthetermoftheforwardcontract.

Q11-7 

Foreigncurrencytransactiongainsorlossesarerecognizedinthefinancialstatementsintheperiodinwhichtheexchangeratechanges.Thesegainsorlossesarereportedontheincomestatement.

Q11-8 

Ifthedirectexchangerateincreases,theSunCompanywillexperienceaforeigncurrencytransactionlossonits$200,000accountpayablethatisdenominatedinCanadiandollars.TheincreaseinthedirectexchangerateshowsthattheU.S.dollarhasweakenedrelativetotheCanadiandollar,requiringmoreU.S.dollarsbeusedtopaythedebtowed.

Q11-9 

FourwaysaU.S.companycanmanagetheriskofchangesintheexchangeratesforforeigncurrenciesareto

（1）useaforwardcontracttooffsetanexposedforeigncurrencyposition,

（2）hedgeafirmforeigncurrencycommitmentasafairvaluehedge,（3）hedgeananticipatedforeigntransactionasacashflowhedge,or（4）speculateinforeigncurrencymarkets.OneexampleofaU.S.companyhedgingagainsttheriskofchangesintheexchangeratesforforeigncurrenciesistouseaforwardexchangereceivablecontracttopartiallyoffsettheeffectsofchangesintheexchangeratesoftheforeigncurrencyliability.

Q11-10 

Anexposednetassetpositionoccurswhenacompany'

stradereceivablesandotherassetsdenominatedinaforeigncurrencyaregreaterthanitsliabilitiesdenominatedinthatcurrency.Anexposednetliabilitypositionoccursifacompany'

sliabilitiesdenominatedinaforeigncurrencyexceedreceivablesdenominatedinthatcurrency.

Q11-11 

Adifferenceusuallyexistsbetweenacurrency'

sspotrateandforwardratebecauseofthe