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Questions
Q:
The complete portfolio refers to the investment in _________.
A. the risk-free asset
B. the risky portfolio
C. the risk-free asset and the risky portfolio combined
D. the risky portfolio and the index
Q:
Accounts representing an allowance for uncollectible accounts are converted into U.S. dollars atA) historical rates when the U.S. dollar is the functional currency.B) current rates only when the U.S. dollar is the functional currency.C) historical rates regardless of the functional currency.D) current rates regardless of the functional currency.
Q:
The industry concentration ratio measures theA) value of the assets owned by the largest corporations in the market.B) percentage of industry sales accounted for by the top four or eight firms.C) difference between price and marginal cost for the largest firms in the industry.D) degree of product differentiation in the market.
Q:
Which of the following statements about the Current Rate method is false?A) Translation involves restating the functional currency amounts into the reporting currency.B) All assets and liabilities are translated at the current rate.C) If the subsidiary maintains their books in their functional currency, the current rate method is used.D) The effect of exchange rate changes are reported on the income statement as a foreign exchange gain or loss.
Q:
Graphically, how does a monopolistically competitive firm determine its profit -maximizing price?A) It accepts the price set by the industry-wide forces of supply and demand.B) Graphically, it finds the place where MR = MC and charges the price directly to the left of that point.C) The firmʹs pricing structure is set by government regulators.D) The firm determines its profit-maximizing output and then charges the price associated with the point on its demand curve directly above that quantity.
Q:
Rank the following from highest average historical standard deviation to lowest average historical standard deviation from 1926 to 2013.
I. Small stocks
II. Long-term bonds III. Large stocks IV. T-bills
A. I, II, III, IV
B. III, IV, II, I
C. I, III, II, IV
D. III, I, II, IV
Q:
Which of the following assets and/or liabilities are considered monetary?A) Intangible Assets and Plant, Property, and EquipmentB) Bonds Payable and Common StockC) Cash and Accounts PayableD) Notes Receivable and Inventories carried at cost
Q:
Refer to the above figure. The firm is currently producing at Q1. The firm should A) reduce production. B) leave production as it is. C) increase production. D) shut down.
Q:
Rank the following from highest average historical return to lowest average historical return from 1926 to 2013.
I. Small stocks
II. Long-term bonds
III. Large stocks
IV. T-bills
A. I, II, III, IV
B. III, IV, II, I
C. I, III, II, IV
D. III, I, II, IV
Q:
Assume the functional currency of a foreign entity is the U.S. dollar, but the books are kept in euros. The objective of remeasurement of a foreign entity's accounts is toA) produce the same results as if the foreign entity's books were maintained in the currency of the largest customer.B) produce the same results as if the foreign entity's books were maintained solely in the local currency.C) produce the same results as if the foreign entity's books were maintained solely in the U.S. dollar.D) produce the results reflective of the foreign entity's economics in the local currency.
Q:
Firms in a perfectly competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of theA) AVC curve. B) MC curve. C) LAC curve. D) AFC curve.
Q:
Which one of the following measures time-weighted returns and allows for compounding?
A. geometric average return
B. arithmetic average return
C. dollar-weighted return
D. historical average return
Q:
A foreign entity is a subsidiary of a U.S. parent company and has always used the current rate method to translate its foreign financial statements on behalf of its parent company. Which one of the following statements is false?A) The U.S. dollar is the functional currency of this company.B) Changes in exchange rates between the subsidiary's country and the parent's country are not expected to affect the foreign entity's cash flows.C) Translation adjustments are shown in stockholders' equity as increases or decreases in other comprehensive income.D) Translation adjustments are not shown on the income statement.
Q:
In the above figure, what happens to the firmʹs optimal level of output if the price it receives for its product decreases from P4 to P3?A) Output stays the same.B) Output decreases. C) Output increases.D) There is not enough information provided to know what happens to output.
Q:
If you want to measure the performance of your investment in a fund, including the timing of your purchases and redemptions, you should calculate the __________.
A. geometric average return
B. arithmetic average return
C. dollar-weighted return
D. index return
Q:
OutputFixed CostsVariable CostsTotal CostsAverage Total CostsAverage Marginal Variable Costs Costs0 $0$100 1 30 2 50 3 60 4 120 5 200 In the above table, what is the average variable cost to produce 4 units of output?A) $30 B) $60 C) $55 D) $20
Q:
Paskin Corporation's wholly-owned Canadian subsidiary has a Canadian dollar functional currency. In translating the subsidiary's account balances into U.S. dollars for reporting purposes, which one of the following accounts would be translated at historical exchange rates?A) Accounts ReceivableB) Notes PayableC) Capital StockD) Retained Earnings
Q:
The ______ measure of returns ignores compounding.
A. geometric average
B. arithmetic average
C. IRR
D. dollar-weighted
Q:
A fixed resource is one thatA) is physically tied to a specific location.B) costs more than the average daily revenue of the firm. C) cannot be varied in the short run.D) can be disposed of only if the firm goes out of business.
Q:
You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of $3.50. Your HPR was ____.
A. 4%
B. 3.5%
C. 7%
D. 11%
Q:
Pelmer has a foreign subsidiary, Sapp Corporation of Germany, whose functional currency is the euro. Sapp's books are maintained in euros. On December 31, 2011, Sapp has an account receivable denominated in British pounds. Which one of the following statements is true?A) Because all accounts of the subsidiary are translated into U.S. dollars at the current rate, the Account Receivable is not adjusted on the subsidiary's books before translation.B) The Account Receivable is remeasured into the functional currency, thus eliminating the need for translation.C) The Account Receivable is first adjusted to reflect the current exchange rate in euros and then translated at the current exchange rate into dollars.D) The Account Receivable is adjusted to euros at the current exchange rate, and any resulting gain or loss is included as a translation adjustment in the stockholders' equity section of the subsidiary's separate balance sheet.
Q:
The problem with the separation of ownership from control is that
A) the owner in a proprietorship may not always act in the profit -maximizing fashion because he or she may not have the experience or expertise that professional managers have.
B) the managing partner of a firm may not always behave in the way that other managers would if they were the managing partners.
C) the managers of the firm can make decisions that reduce the wealth of the owners while not reducing their own wealth.
D) the owners of firms may not always know the best way to run a firm, yet they are the ones who elect the managers of the firm.
Q:
The primary goal behind consolidating financial statements of a controlled subsidiary isA) assuring that the subsidiary financial statements are the same under the temporal method or the current rate method.B) assuring that the individual nature of the subsidiary entity is not lost in the consolidation.C) representing the conversion of statements at the historical exchange rate.D) representing the company's underlying economic condition.
Q:
Disadvantages of ETFs include all of the following exceptA. investors incur a bid-ask spread when purchasing.B. investors must pay a broker fee when purchasing.C. prices are only quoted once each day.D. prices can depart from NAV at times.
Q:
All of the following factors would be used to define a foreign entity's functional currency, exceptA) high volume of intercompany transactions.B) expenses for foreign entity primarily driven by local factors.C) financing for foreign entity denominated in local currency.D) foreign entity's status as a local tax haven for transfer pricing purposes.
Q:
The slope of the budget constraint line is theA) income of consumers divided by the price of each good.B) ratio of this yearʹs income to last yearʹs income. C) rate of exchange between the two goods.D) ratio of different levels of income.
Q:
Approximately what percentage of assets held in equity funds in 2014 was in index funds?
A. 20%
B. 33%
C. 50%
D. 60%
Q:
The reason that all -you-can-eat restaurants can make a profit is due toA) the law of demand.B) the law of increasing relative costs.C) the law of diminishing marginal utility.D) the law of diminishing marginal returns.
Q:
Selvey Inc. is a wholly-owned subsidiary of Parsfield Incorporated, a U.S. firm. The country where Selvey operates is determined to have a highly inflationary economy according to GAAP definitions. Therefore, for purposes of preparing consolidated financial statements, the functional currency isA) its reporting currency.B) its current rate method currency.C) the US dollar.D) its local currency.
Q:
Which type of fund generally has the lowest average expense ratio?
A. actively managed bond funds
B. hedge funds
C. indexed funds
D. actively managed international funds
Q:
A U.S. firm has a Belgian subsidiary that uses the British pound as its functional currency. According to GAAP, the U.S. dollar from Belgian unit's point of view will beA) its only foreign currency.B) its local currency.C) its current rate method currency.D) its reporting currency.
Q:
PxQxPyQyPzQz$10100$2050$25200109018602522510701590252751250151002529015251512025320Refer to the above table. The price of Y decreases from $18 to $15. What is the cross price elasticity of demand between Y and X?A) -0.73 B) -1.0 C) +1.38 D) +1.83
Q:
Which type of fund is often priced at a significant discount to net asset value?
A. open-end fund
B. closed-end fund
C. hedge fund
D. ETF
Q:
On March 1, 2011, Amber Company sold goods to a foreign customer at a price of 50,000 foreign currency units. The customer will pay in three months. At the time of the sale, Amber paid $2,000 to acquire an option to sell 50,000 foreign currency units in three months at the strike price of $0.39. On May 30, 2011, the customer sent in 50,000 foreign currency units. Quarterly financial reports are prepared on March 31. Ignore the time value of money. Relevant exchange rates are as follows: Spot Rate Mar 1, 2011
$0.39 Mar 31, 2011
$0.45 May 30, 2011
$0.36 Required:
Prepare the journal entries required for these transactions, if the foreign currency option is designated as a fair value hedge.
Q:
PricePer Unit Quantity DemandedPer Week$10.00259.50309.00358.50408.00457.50507.00556.50606.00655.50705.0075Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?A) 0.85 B) 1.08 C) 1.17 D) 0.92
Q:
The five-star Morningstar rating implies
A. superior returns compared to risk.
B. superior risk compared to return.
C. lowest turnover compared to peers.
D. lowest fees compared to peers.
Q:
On December 18, 2011, Wabbit Corporation (a U.S. Corporation) has a Forward Contract recorded on their ledger as a debit balance of $17,500. The forward contract was related to a purchase of electronic components purchased overseas, which were going to be re-sold in the United States. On December 20, the forward contract was settled with a payment of $20,000, and the related parts which cost $118,000 were sold for $160,000 cash. The forward contract is set up to lock in the price for the electronic components when they are sold. The forward contract was settled net. Assume this is a cash flow hedge.
Required:
Prepare the journal entries required by Wabbit on December 20.
Q:
When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is true?A) Voluntary agreements usually do not work since the owner has no incentive to negotiate. B) Transactions costs must be low relative to the expected benefits of reaching an agreement. C) Voluntary agreements are difficult to negotiate because they usually involve government intervention.D) Voluntary agreements always leave the owner worse off.
Q:
You are considering investing in a no-load mutual fund with an annual expense ratio of .6% and an annual 12b-1 fee of .75%. You could also invest in a bank CD paying 6.5% per year. What minimum annual rate of return must the fund earn to make you better off in the fund than in the CD?
A. 7.1%
B. 7.45%
C. 7.25%
D. 7.85%
Q:
Ferb Company is a U.S.-based importer of fine fabrics. They periodically place orders with an Italian manufacturer for bolts of fabric at a price typically set in euros. Because they have business on an ongoing basis in euros, Ferb also enters into forward contracts to speculate on the Euro. On September 15, Ferb entered into a 45-day forward contract to purchase 2,000,000 euros. Ferb has a year-end of September 30. The forward contract cannot be settled net. Relevant exchange rates are shown below: Spot Rate
Forward Rate to October 30, 2011 Sep 15, 2011
$1.415
$1.397 Sep 30, 2011
$1.395
$1.399 Oct 30, 2011
$1.410
$1.410 Required:
Prepare the journal entries to account for the forward contract for September and October.
Q:
The top Morningstar mutual fund performance rating is ________.
A. five stars
B. four stars
C. three stars
D. two stars
Q:
An important contributor to rising U.S. health care costs in recent years isA) less interest on the part of Americans to stay physically fit. B) the increasing proportion of the population that smokes.C) an easing of standards at medical schools that has permitted unqualified people to become physicians.D) the aging of the population.
Q:
Opie Industries is a manufacturer of plastic bottles. On September 1, 2011, Opie purchased an option contract at a cost of $2,000. The purpose of the option is to hedge against increases in the price of this type of plastic, "PET." The option is to buy 1,000,000 pounds of PET on March 1, 2012 for $.75 per pound. If the market price of PET is below $.75 on March 1, Opie will let the option expire. If the market price is above $.75, then Opie will exercise the option. The option is to be settled net. Opie assumes a 6% annual borrowing rate. Assume this is a cash flow hedge.
Required:
Prepare the entry that Opie should record on September 1, 2011. Then, assuming that the price of PET is $.72 on December 31, 2011 (Opie's year end), prepare the entry that Opie should record. Finally, prepare the entries for March 1, 2012, assuming that the price of PET is $.78.
Q:
Use the above table. The MFC of the 4th worker isA) $5. B) $6.25. C) $25. D) $40.
Q:
Which one of the following statements about returns reported by mutual funds is not correct?
A. Reported returns are net of management expenses.
B. Reported returns are net of 12b-1 fees.
C. Reported returns are net of brokerage fees paid on the fund's trading activity.
D. None of these options. (All of the items are included in reported returns.)
Q:
Ivan has 14,000 barrels of oil that were purchased a month ago at $50.00 per barrel. On November 1, 2011 Ivan hedges the value of the inventory by entering into a forward contract to sell 14,000 barrels of oil on January 31, 2012 for $60.00 per barrel. The forward contract is to be settled net.
Assume this is a fair value hedge.
Required:
Assume a 6% discount rate is reasonable, and using a mixed-attribute model, prepare the journal entries to account for this hedge at the following dates: When the market price is... November 1, 2011
$60.00 per barrel December 31, 2011
$65.00 per barrel January 31, 2012
$62.00 per barrel
Q:
The Wagner Act
A) permitted unions to engage in collective bargaining.
B) permitted states to pass right-to-work laws.
C) restricted activities of heads of unions that were not beneficial to union members.
D) mandates compulsory arbitration in some key industries.
Q:
You pay $21,600 to the Laramie Fund, which has a NAV of $18 per share at the beginning of the year. The fund deducted a front-end load of 4%. The securities in the fund increased in value by 10% during the year. The fund's expense ratio is 1.3% and is deducted from year-end asset values. What is your rate of return on the fund if you sell your shares at the end of the year?
A. 4.35%
B. 4.23%
C. 6.45%
D. 5.63%
Q:
When an input represents a small proportion of a firmʹs total costs, thenA) demand for the input will tend to be less elastic.B) the input demand will vary significantly with a change in input price. C) the usage of the input cannot be varied in the production function.D) output demand will be highly elastic.
Q:
You invest in a mutual fund that charges a 3% front-end load, 1% total annual fees, and a 0% back-end load on Class A shares. The same fund charges a 0% front-end load, 1% total annual fees, and a 2% back-end load on Class B shares. What are the total fees in year 1 on a Class B investment of $20,000 if you redeem shares with no growth in value?
A. $596
B. $794
C. $885
D. $902
Q:
On January 1, 2011, Bosna borrowed $100,000 from Lenda. The three-year term note carries a variable rate interest, based on LIBOR, and interest is payable at December 31 of each year, compounded annually. The first year's rate of interest is 7% and Bosna would like to assure that their rate does not increase. Bosna enters into a pay-fixed, receive-variable interest rate swap agreement with Swamp City Bank, under which Bosna will pay 7%, fixed. At December 31, 2011, it is determined that Bosna's interest rate to Lenda for 2012 will be 6%. At December 31, 2012, the interest rate for 2013 was determined to be 8%. Treat as a cash flow hedge.
Required:
Determine the estimated fair value of the hedge at December 31, 2011, and prepare the related journal entries required to document this hedge and the related interest payments at December 31, 2011, 2012, and 2013, including final repayment on 12/31/13. Assume a flat interest rate curve.
Q:
On January 1, 2011, Bambi borrowed $500,000 from Lonni. The five-year term note carries a variable rate interest, based on LIBOR, and interest is payable at December 31 of each year, compounded annually. The first year's rate of interest is 6% and Bambi would like to assure that their rate does not increase. Bambi enters into a pay-fixed, receive-variable interest rate swap agreement with Third National Bank, under which Bambi will pay 6%, fixed. At December 31, 2011, it is determined that Bambi's interest rate to Lonni for the next year will be 5%. Treat as a cash flow hedge.
Required:
Determine the estimated fair value of the hedge at December 31, 2011, and prepare the related journal entry required to document this hedge and the related interest payment at December 31, 2011. Assume the interest rate curve is flat.
Q:
The regulatory agency most concerned with false advertising is the
A) Antitrust Division of the Justice Department.
B) National Labor Relations Board. C) Federal Deposit Insurance Corp. D) Federal Trade Commission.
Q:
Astrotuff Company is planning to purchase 200,000 pounds of nylon from Tangsun Company. On November 1, 2011, Astrotuff entered into a 90-day forward contract to hedge the planned purchase. The forward contract is to purchase 200,000 pounds of nylon at $1.80 per pound (forward rate at November 1, 2011). On November 1, 2011, the spot price of nylon is $1.75 per pound, but Astrotuff anticipates significant increases in the price of nylon. The forward contract is to be settled net.
On December 31, 2011, Astrotuff's year end, the forward rate to January 30, 2012 is $1.78 per pound. The spot and forward rates on January 30, 2012 are $1.85 per pound. Astrotuff uses a 6% discount rate relating to their hedging activity. Astrotuff purchases 200,000 pounds of nylon on January 30 when the forward contract expires.
Required:
Prepare the necessary journal entries to account for this cash flow hedge and related purchase of nylon.
Q:
Other things being equal, which market structure would produce the least output and the highest average product price?A) Monopoly B) OligopolyC) Monopolistic competition D) Perfect competition
Q:
Suppose that an industry consists of 100 firms, and the top 4 firms have annual sales of $1 million, $1.5 million, $2 million, and $2.5 million, respectively. If the entire industry has annual sales of $8.5 million, the four-firm concentration ratio is approximatelyA) 82 percent. B) 50 percent. C) 94 percent. D) 70 percent.
Q:
Which of the following funds are usually most tax-efficient?A. equity fundsB. bond FundsC. ETFsD. specialized-sector funds
Q:
On December 15, 2011, Electronix Company purchased inventory from a foreign supplier for 2,000,000 foreign currency units (fcu's). Payment will be made on February 13, 2012. On December 15, 2011, to hedge the transaction, Electronix signed a forward contract to buy 2,000,000 fcu's in 60 days. Electronix uses a discount rate of 5% resulting in a 45-day present value factor of .9938. The forward contract will be settled net. The related exchange rates are shown below: Spot Rate
Forward Rate to 2/13/12 December 15, 2011
$0.010 = 1 fcu
$0.010 = 1 fcu December 31, 2011
$0.012 = 1 fcu
$0.011 = 1 fcu February 13, 2012
$0.013 = 1 fcu
$0.013 = 1 fcu On December 15, 2011, Electronix recorded a debit to Inventory and a credit to Accounts Payable (fcu) for $20,000, using the current spot rate.
Required:
1. Show the required entries on December 31, 2011 if the hedge is a cash flow hedge. Round to the nearest whole dollar.
2. Show the required entries on December 31, 2011 if the hedge is a fair value hedge. Round to the nearest whole dollar.
Q:
Which of the following statements about a monopolistically competitive firm is FALSE?A) It tries to differentiate its product from that of competitors.B) It may earn short-run economic profits.C) It produces the quantity at which MC =MR. D) It sets price like a perfectly competitive firm.
Q:
The assets of a mutual fund are $25 million. The liabilities are $4 million. If the fund has 700,000 shares outstanding and pays a $3 dividend, what is the dividend yield?
A. 5%
B. 10%
C. 15%
D. 20%
Q:
Wild West, Incorporated (a U.S. corporation) sold inventory to a company in the Philippines for 1,600,000 pesos on account on February 1, 2011, with payment expected in 90 days. Wild West entered into a forward contract to hedge this transaction, and properly accounts for the transaction as a cash flow hedge. Wild West has a March 31 fiscal year end, and uses an 8% discount rate, resulting in a 30-day present value factor of .9934. The forward contract is settled net. The relevant exchange rates are shown below: Spot Rate
Forward Rate to May 2, 2011 February 1, 2011
$0.0229 = 1 peso
$0.0270 = 1 peso March 31, 2011
$0.0254 = 1 peso
$0.0268 = 1 peso May 2, 2011
$0.0280 = 1 peso
$0.0280 = 1 peso Required:
Record the journal entries needed by Wild West on February 1, March 31, and May 2. Round all entries to the nearest whole dollar.
Q:
Slickton Corporation, a U.S. holding company, enters into a forward contract on November 1, 2011 to speculate in Singapore dollars (S$). The forward contract requires Slickton to sell 1,000,000 Singapore dollars to the exchange broker on January 30, 2012. Net settlement is not permitted. Relevant exchange rates for the Singapore dollar are listed below: 11/1/11
12/31/11
1/30/12 Spot rate
$0.806
$0.797
$0.802 30-day forward rate
$0.805
$0.792
$0.796 90-day forward rate
$0.804
$0.795
$0.789 Required:
Prepare the journal entries required by Slickton on November 1, 2011, December 31, 2011 (year end), and January 30, 2012.
Q:
Refer to the above figure. The firm is currently producing at Q2. The firm shouldA) reduce production. B) leave production as it is. C) increase production. D) shut down.
Q:
A mutual fund has $50 million in assets at the beginning of the year and 1 million shares outstanding throughout the year. Throughout the year assets grow at 12%. The fund imposes a 12b-1 fee on all shares equal to 1%. The fee is imposed on year-end asset values. If there are no distributions, what is the end-of-year NAV for the fund?
A. $50
B. $55.44
C. $56.12
D. $54.55
Q:
The offer price of an open-end fund is $18 and the fund is sold with a front-end load of 5%. What is the fund's NAV?
A. $18.74
B. $17.10
C. $15.40
D. $16.57
Q:
Onoly Corporation (a U.S. manufacturer) sold parts to its customer in Hong Kong on December 8, 2011 with payment of 500,000 Hong Kong Dollars (HKD) to be received in sixty days on February 6, 2012. Onoly has a December 31 year end. The following exchange rates apply:
Spot Rate Forward Rate to February 6
December 8, 2011 $.1150 $.1150
December 31, 2011 $.1300 $.1250
February 6, 2012 $.1400 $.1400
Required:
1. Assuming no forward contract is taken, what is the amount of foreign currency exchange gain or loss that would be recorded in 2011, and in 2012?
2. Assuming a 60-day forward contract is taken on December 8 with the intent of hedging this foreign currency transaction, and that this hedge is properly accounted for as a cash flow hedge, what is the net effect on income to be recorded in 2011, and in 2012?
Q:
For a firm in a perfectly competitive industry, A) short-run economic profits must be zero.B) short-run and long-run economic profits must be zero.C) short-run economic profits may be positive, but long-run economic profits must be zero.D) both short-run and long-run economic profits may be negative.
Q:
An open-end fund has a NAV of $16.50 per share. The fund charges a 6% load. What is the offering price?
A. $14.57
B. $15.95
C. $17.55
D. $16.49
Q:
On November 1, 2010, Ironside Company (a U.S. manufacturer) sold an airplane for 1 million New Zealand dollars (NZ$) to a New Zealand company, Wellington Corporation. Ironside will receive payment on January 30, 2011 in New Zealand dollars. In order to hedge the accounts receivable position, Ironside entered into a 90-day forward contract on November 1, 2010 to sell 1 million New Zealand dollars. On November 1, 2010, the forward rate is US$0.79 per New Zealand dollar. The forward contract will be settled net. This is a fair value hedge. Ignore the time value of money.
The relevant exchange rates per New Zealand dollar:
Spot Rate Forward Rate to 1/30/11
Nov. 1, 2010 US$0.79 US$0.79
Dec. 31, 2010 US$0.75 US$0.76
Jan. 30, 2011 US$0.73 US$0.73
Required:
Record the journal entries that Stateside would need to prepare at November 1, 2010, December 31, 2010 and January 30, 2011.
December 31 is the fiscal year end.
Q:
In the above figure, what happens to the firmʹs optimal level of output if the price it receives for its product increases from P2 to P3?A) Output stays the same. B) Output decreases.C) Output increases.D) There is not enough information provided to know what happens to output.
Q:
From 1971 to 2013 the average return on the Wilshire 5000 Index was _________ the return of the average mutual fund.A. identical toB. .9% higher thanC. .9% lower thanD. 1.3% higher than
Q:
On November 1, 2010, Stateside Company (a U.S. manufacturer) sold an airplane for 1 million New Zealand dollars (NZ$) to New Zealand company Aukland Corporation. Stateside will receive payment on January 30, 2011 in New Zealand dollars. In order to hedge the accounts receivable position, Stateside entered into a 90-day forward contract to sell 1 million New Zealand dollars on January 30, 2011. On November 1, 2010, the 90-day forward rate is US$0.73 per New Zealand dollar. The forward contract will be settled net. Account for the hedge as a fair value hedge. Ignore the time value of money.
The relevant exchange rates per New Zealand dollar:
Spot Rate Forward Rate to 1/30/11
Nov. 1, 2010 US$0.73 US$0.73
Dec. 31, 2010 US$0.75 US$0.76
Jan. 30, 2011 US$0.79 US$0.79
Required:
Record the journal entries that Stateside would need to prepare at November 1, 2010, December 31, 2010 and January 30, 2011.
December 31, 2010 is the fiscal year end.
Q:
OutputFixed CostsVariable CostsTotal CostsAverage Total CostsAverage Marginal Variable Costs Costs0 $0$100 1 30 2 50 3 60 4 120 5 200 In the above table, what is the marginal cost to produce the 2nd unit of output?A) $30 B) $60 C) $55 D) $20
Q:
On November 1, 2010, Athom Corporation purchased 5,000 television sets for its merchandise inventory from Sockk, a South Korean firm, at a total quoted cost of 600,000,000 won (W). On this date, the spot rate for the won was $1 = 1,080W. On the same day, Athom invested $500,000 cash in a non-interest bearing account with a Japanese bank, to hedge its exposed liability position. The account payable to Sockk is due on January 30, 2011. The exchange rates on December 31, 2010 and January 30, 2011 were $1 = 1,060W, and $1 = 1,030W, respectively. Athom agreed to pay Sockk in won. The bank deposit made by Athom will be held in won, but will be withdrawn in dollars by Athom on January 30th. Assume that Athom has a December 31 year-end. Assume this is a fair value hedge.
Required:
Prepare all the journal entries for Athom Corporation's General Journal on November 1, 2010, December 31, 2010, and January 30, 2011. Round entries to the nearest whole dollar. If no entry is required on a particular date, indicate "No entry" in the General Journal.
Q:
The long run is defined as the time period in whichA) the firm can vary only one input.B) the firm can make positive economic profits.C) all factors of production can be altered. D) the firm can alter its rate of production.
Q:
_______ have become the main way for investors to speculate in precious metals.
A. Strategic income funds
B. Balanced funds
C. Specialized-sector funds
D. Exchange-traded funds
Q:
Which of the following funds is most likely to have a debt ratio of 70% or higher?A. bond fundB. commingled fundC. mortgage-backed securitiesD. REIT
Q:
On November 1, 2010, Mayberry Corporation, a U.S. corporation, purchased from Cantata Corporation, a Mexican company, some machinery that cost 1,000,000 pesos. The invoice was payable in pesos on January 30, 2011. To hedge against rapid changes in the peso, Mayberry entered into a forward contract on November 1, 2010 with AB Trader & Company, a US brokerage and investment firm. The contract specified that Mayberry would buy 1,000,000 pesos from AB Trader at $0.084 per peso for settlement on January 30, 2011.
Assume that all three companies are subject to the same accounting standards and have December 31st year-ends. The spot rates for pesos on November 1, December 31, and January 30, are $0.082, $0.080, and $0.089, respectively. The 30-day forward rate for pesos on December 31, 2010 is $0.083. The forward contract is not settled net.
Required:
Record General Journal entries for Mayberry Corporation on November 1, December 31, and January 30. If no entry is required on a particular date, indicate "No entry" in the General Journal. This is a fair value hedge.
Q:
It is likely that the owners have little to do with the day -to-day management of a firm in the case ofA) partnerships only. B) proprietorships only.C) corporations only. D) partnerships and corporations.
Q:
If the quantity of hamburgers is measured along the horizontal axis and the quantity of movies is measured along the vertical axis, and the price of a hamburger is $2.00 while the price of a movie is $12, then the slope of the budget line isA) -1/3. B) -3.5 C) -1/6. D) -6.