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15 A sale for 200,000 francs was made by a French...




15 A sale for 200,000 francs was made by a French company to a Canadian company when the exchange rate was F4.0 = Can$1.00. The rate changed to F4.5 = Can$ 1.00 on the date payment was due. The transaction is denominated in francs. Required: (1) Did the seller face any transaction exposure? If the answer is yes, what was the amount? (2) Did the buyer have any transaction gain or loss? If the answer is yes, was it a gain or loss, and what was the amount? 16 U.S.-based Anderson Company engages in a number of foreign currency transactions that have resulted in the following balances: Cash: British pounds 800,000 Cash: Swiss francs 500,000 Accounts receivable: Swiss francs 3,200,000 Accounts receivable: British pounds 1,050,000 Accounts payable: Swiss francs 700,000 Accounts payable: Swedish krona 800,000 Notes payable: Swedish krona 200,000 Management forecasts the following exchange rate changes for the near future: ? The Swiss franc will weaken against the dollar by 5 percent. ? The British pound will strengthen relative to the dollar by 10 percent. ? The Swedish krona will strengthen against the dollar by 15 percent. Required: Develop a strategy for Anderson?s foreign currency. The strategy should maximize Anderson?s gain or minimize its loss, whatever the case. 19 Holt Corporation?s subsidiary in Poland has fixed assets valued at 10,000,000 zloty (zl). Of these, one-quarter was acquired four years ago when the exchange rate was z13.50 = $1.00. The balance was acquired two years ago when the exchange rate was z13.80 = $1.00. Fixed assets are being depreciated using the straight-line method with an estimated useful life of 10 years and assuming no salvage value. The following exchange rates are for the current year: Year-end rate: zl4.20 = $1 .00 Weighted average rate: zl4.00 = $1 .00 Required: (1) Conforming to SFAS No. 52, calculate the Polish subsidiary?s depreciation expense for the current year assuming the zloty is the functional currency. (2) Repeat requirement (1) assuming the U.S. dollar is the functional currency.


Paper#6008 | Written in 18-Jul-2015

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