Advanced Accounting, 11e (Beams/Anthony/Bettinghaus/Smith)
Chapter 13 Accounting for Derivatives and Hedging Activities
Multiple Choice Questions
1) Which of the following hedging strategies would a business most likely u?
A) An importer will want to hedge his foreign denominated accounts receivable and will purcha forward contracts to hedge an expod net ast position.
B) An importer will want to hedge his foreign denominated accounts payable and will purcha forward contracts to hedge an expod net liability position.
C) An exporter will want to hedge his foreign denominated accounts receivable and will purcha forward contracts to hedge an expod net liability position.
D) An exporter will want to hedge his foreign denominated accounts payable and will purcha forward contracts to hedge an expod net liability position.
Answer: B
Objective: LO2
Difficulty: Easy
2) A highly-effective hedge of an existing ast or liability that is reported on the balance sheet would be recorded using
A) Modified Cash Basis Accounting.
B) Critical Term Hedge Analysis.
C) Fair Value Hedge Accounting.
卡培他滨片D) Hedge of Net Investment in Foreign Subsidiary.
Answer: C
Objective: LO2
Difficulty: Easy
3) Which of the following is not an approach appropriate for hedge accounting?
A) Cash Flow Hedge Accounting
B) Critical Term Hedge Accounting
C) Fair Value Hedge Accounting
D) Hedge of Net Investment in Foreign Subsidiary
Answer: B
Objective: LO1, 2
丰羽Difficulty: Easy
4) If a financial instrument is classified as a cash flow hedge, then
A) its gains or loss are reported in the income statement if a fiscal year-end occurs before the ttlement date.
B) it is classified as a held-to-maturity ast.
C) it does not require a notional amount.
D) its gains or loss are reported in the balance sheet if a fiscal year-end occurs before the ttlement date.
Answer: D
Objective: LO1
Difficulty: Easy
5) When a cash flow hedge is appropriate, the effective portion of the gain or loss on the derivative is
A) deferred using other comprehensive income.
B) recognized immediately at the time the agreement is made.
C) recognized over time, amortized over the period of the agreement.
D) recognized over time, offt by the fluctuation in the value of the hedged ast or liability.
Answer: A
Objective: LO1
Difficulty: Easy
6) Barnes Company entered into a forward contract during the current year to hedge the risk of a material supply cost increa. Bad on the current market, at year-end the prent value of the estimated amount they will have to pay in ten months is $750,000. What entry would be recorded at year-end closing, assuming that no amount was recorded for this contract until this time?
Answer: D
Objective: LO3
鬼屋作文Difficulty: Moderate
7) A forward contract ud as a cash flow hedge will be recorded as an ast if
A) the holder is expecting to receive a payment as a result of the contract.
B) the holder is accounting for the hedged instrument as a fair value hedge.
C) the holder is hedging the net investment in a foreign entity.
D) the holder is using the alternate accounting method and deferring all gains or loss from the hedge. Answer: A陶罐与铁罐
Objective: LO1
Difficulty: Easy
8) A fair value hedge differs from a cash flow hedge becau a fair value hedge
A) cannot be ud for firm purcha or sales commitments.
B) is not recorded unless it is a highly-effective hedge.
C) records gains or loss in the value of the derivative directly to earnings of the company.
D) defers the gains or loss in the value of the derivative using Other Comprehensive Income. Answer: C
Objective: LO3
假文盲Difficulty: Easy
9) The purcha price of an option contract is typically recorded as
A) an expen.
B) an ast.
C) an amortized cost.
D) a component of shareholders equity.
Answer: B
Objective: LO3
Difficulty: Easy
10) Taydus Corporation, a U.S. corporation, sold goods on December 2 to a company overas, and is now carrying a receivable denominated in euros. Taydus signed a 60-day forward contract on that same date to ll euros. The spot rate was $1.40 on the date they signed the contract and the 60-day forward rate was $1.36. At the end of that month when they clod the books at their fiscal year-end, the spot rate was $1.42 and the 30-day forward rate was $1.40. Assume this is a fair value hedge. The forward contract will not be ttled net. What would be reported by Taydus for the year ending December 31?
A) Net exchange gain
B) Net exchange loss
C) Deferred exchange gain
D) Deferred exchange loss
Answer: B
Explanation: B) The spot rate incread $.02, resulting in a gain on the receivable.
The forward rate incread $.04, resulting in a larger loss on the forward, thus they experienced a net exchange loss.
Objective: LO4
Difficulty: Moderate
11) Cirtus Corporation, a U.S. corporation, placed an order for inventory from a Mexican supplier on September 18 when the spot rate was $0.0840 = 1 peso. The invoice price will be denominated in pesos. At that time, they entered into a 30-day forward contract (designated as a fair value hedge of the firm commitment to purcha) to purcha 860,000 pesos at a forward rate of $0.0810. On October 18 when the inventory was received, the spot rate was $0.0890. At what amount should the inventory be carried on Cirtus' books?
A) $69,660
B) $72,240
C) $76,540
D) $860,000
Answer: A
Explanation: A) Inventory = 860,000 × .081 = $69,660
Objective: LO4
Difficulty: Moderate
12) When preparing their year-end financial statements, the Warner Company includes a footnote regarding their hedging activities during the year. Which of the following is not required to be disclod?
A) How hedge effectiveness is determined and assd
B) The specific types of risks being hedged, and how they are being hedged
C) Alternative hedging options declined
除夕的诗句最有名的D) The net gain or loss reported for the period for fair value hedges and where in the financial statements it is reported
Answer: C
Objective: LO5
Difficulty: Moderate
13) International accounting standards differ from U.S. Generally Accepted Accounting Principles in that International standards
A) require that firm sale or purcha commitments are accounted for as fair value hedges.
B) require that firm sale or purcha commitments are accounted for as cash flow hedges.
C) state that firm sale or purcha commitments may not be treated as a hedged transaction.
D) permit firm sale or purcha commitments to be accounted for as either fair value hedges or cash flow hedges.
Answer: D
Objective: LO6
Difficulty: Moderate
14) On May 1, 2011, Listing Corporation receives inventory items from their Bulgarian supplier. At the same time, Listing signed a forward contract to purcha 75,000 Bulgarian lev in sixty days to hedge the inventory purcha at $0.738, the 60-day forward rate. Payment for the inventory will be due in sixty days in Bulgarian lev. Assume the forward contract will be ttled net and this qualifies as a fair value hedge. The related exchange rates are shown below:
Assuming a prent value factor of 1 for simplicity, what is the fair value of this forward contract on May 31?
A) $150 ast
B) $150 liability
C) $375 ast
D) $375 liability
Answer: A
Explanation: A)
Current forward rate: 75,000 lev × $0.7400 $55,500
Contracted forward rate: 75,000 lev × $0.7380 55,350
Net change in value 150
With PV = 1, Net change = ast value
Objective: LO4
Difficulty: Moderate
U the following information to answer the question(s) below.
On November 2, 2011, Bellamy Corporation lls product to their Danish customer. At the same time,
Bellamy signed a forward contract to ll 200,000 Danish krone in ninety days to hedge the account receivable at$0.1905, the 90-day forward rate. The receivable is expected to be collected in ninety days. Assume the forward contract will be ttled net and this is a fair value hedge. The related exchange rates are shown below:
15) Assuming a prent value factor of 1 for simplicity, what is the fair value of this forward contract on November 2?
四年级下册数学应用题A) $-0-
B) $100 ast
C) $100 liability
D) $38,100 ast
Answer: A
Objective: LO4
Difficulty: Moderate
16) Assuming a prent value factor of 1 for simplicity, what is the fair value of this forward contract on December 31?
A) $160 ast
B) $160 liability
C) $140 ast
D) $140 liability
Answer: D
Objective: LO4
Difficulty: Moderate
17) Assuming a prent value factor of 1 for simplicity, what is the fair value of this forward contract on January 31?
A) $-0-
B) $ 60 ast
C) $160 liability
D) $200 liability
服装行业分析
Answer: D
Objective: LO4
Difficulty: Moderate
