Q&A Hero

Q: Indicate whether the statement is true or false.Banks will not accept intangible assets, such as patents and brand names, as collateral for commercial loans.a. Trueb. False

Q: Which account would be decreased with a credit? A) Cash B) Accounts Payable C) Common Stock D) Retained Earnings

Q: Generally, a ____ home currency can ____ domestic economic growth. a. weak; dampen b. strong; stimulate c. strong; dampen d. weak; dampen AND strong; stimulate

Q: Which account would be increased with a debit? A) Retained Earnings B) Accounts Receivable C) Common Stock D) Notes Payable

Q: Assume an equilibrium state in which European inflation and U.S. inflation are both 4 percent. If U.S. inflation suddenly decreases to 2 percent, the euro will ____ against the dollar by approximately ____ percent, according to purchasing power parity. a. appreciate; 2 b. depreciate; 2 c. appreciate; 4 d. depreciate; 4 e. None of these are correct.

Q: A company purchased equipment for use in the business at a cost of $12,000, one-fourth was paid in cash, and the company signed a note for the balance. The journal entry to record this transaction will include a: A) debit to Notes Payable of $9,000. B) debit to Cash of $12,000. C) credit to Notes Payable of $9,000. D) debit to Equipment of $3,000.

Q: The devaluation of a countrys currency a. makes foreign products more expensive for consumers in that country. b. increases foreign demand for that countrys exports. c. can lead to deflation in that country. d. makes foreign products more expensive for consumers in that country AND increases foreign demand for that countrys exports.

Q: Which of the following statements about the debit/credit framework is correct? A) All asset accounts have a normal debit balance with the exception of cash which has a normal credit balance. B) The Common Stock account is increased by debits. C) When payment is made on a liability such as accounts payable, the liability account is decreased with a debit. D) The total amount of asset accounts must equal the total amount of liability accounts minus the total amount of stockholders equity accounts.

Q: ​Purchasing power parity suggests that the exchange rate will on average change by a percentage that reflects the ____ differential between two countries. a. ​income b. ​interest rate c. ​inflation d. ​tax

Q: Assume the following information. Interest rate on borrowed euros is 5 percent annualized. Interest rate on dollars loaned out is 6 percent annualized. Spot rate is 1.10 euros per dollar (one euro = $0.909). Expected spot rate in five days is 1.15 euros per dollar. Fabrizio Bank can borrow 10 million euros. If Fabrizio Bank attempts to capitalize on the above information, its profit over the five-day period is a. 2,653,597.22 euros. b. 455,266.81 euros. c. 452,426.04 euros. d. None of these are correct.

Q: A company started the year with a normal balance of $68,000 in the Inventory account. During the year, debits totaling $45,000 and credits totaling $55,000 were posted to the Inventory account. Which of the following statements about the Inventory account is correct? A) The normal balance of the Inventory account is a credit balance. B) After these amounts are posted, the balance in the Inventory account is a credit balance of $58,000. C) The Inventory account is decreased by debits. D) The debits and credits posted to the Inventory account caused it to decrease by $10,000.

Q: When a government influences factors, such as inflation, interest rates, or income, in order to affect currency's value, this is an example of​ a. ​direct intervention. b. ​indirect intervention. c. ​a freely floating system. d. ​a pegged system.

Q: The normal balance of any account is the: A) left side. B) right side. C) side which increases that account. D) side which decreases that account.

Q: If the spot rate of the British pound is $2, and the 180-day forward rate is $2.05, what is the annualized premium or discount? a. 2.5 percent discount b. 2.5 percent premium c. 10 percent premium d. 5 percent discount e. 5 percent premium

Q: Which of the following statements about the debit/credit framework is correct? A) Stockholders Equity = Assets + Liabilities. B) The total value of credits in all accounts must always equal the total value of debits in all accounts. C) The normal balance for an account is the side on which it decreases. D) A decrease in Common Stock would be recorded with a credit.

Q: Which of the following are most likely to provide currency forward contracts to their customers?​ a. ​commercial banks b. ​international mutual funds c. ​brokerage firms d. ​insurance companies

Q: The standard formatting for a journal entry lists the dollar amounts for: A) credits underneath and to the right of the dollar amounts for debits. B) debits and credits aligned equally to the right. C) debits underneath and to the right of the dollar amounts for credits. D) debits and credits aligned equally to the left.

Q: ____ serve as financial intermediaries in the foreign exchange market by buying or selling currencies to accommodate customers. a. Pension funds b. International mutual funds c. Insurance companies d. Commercial banks e. None of these are correct.

Q: For both accounts and amounts, the standard formatting for a journal entry lists: A) credits first and then debits, both aligned to the left. B) credits first and then debits, indented underneath. C) debits first and then credits, both aligned to the right. D) debits first and then credits, indented to the right underneath.

Q: On a financial website, you observe that the euro () is quoted for $1.67. The Canadian dollar (C$) is quoted for $0.62. What is the value of the Canadian dollar in euros? a. C$2.69 b. 0.37 c. 2.69 d. C$0.37 e. None of these are correct.

Q: Which of the following statements about normal account balances is correct? A) Assets have debit balances and liabilities have credit balances. B) Assets and liabilities have credit balances. C) Assets have credit balances and liabilities have debit balances. D) Assets and liabilities have debit balances.

Q: Assume that a British pound put option has a premium of $.03 per unit and an exercise price of $1.60. The present spot rate is $1.61. The expected future spot rate on the expiration date is $1.52. The option will be exercised on this date, if at all. What is the expected per unit net gain (or loss) resulting from purchasing the put option?​ a. ​$.01 loss b. ​$.09 loss c. ​$.09 gain d. ​$.05 gain

Q: Cash had a beginning balance of $68,900. During the month, Cash was credited for $16,000 and debited for $18,300. At the end of the month, the balance is: A) $71,200 credit. B) $71,200 debit. C) $66,600 debit. D) $66,600 credit.

Q: Currency futures contracts differ from forward contracts in that they​ a. ​are an obligation. b. ​are not an obligation. c. ​are standardized. d. ​can specify any amount and maturity date.

Q: A credit would make which of the following accounts decrease? A) Common Stock B) Inventory C) Notes Payable D) Retained Earnings

Q: In a(n) ____ exchange rate system, the foreign exchange market is totally free from government intervention. a. pegged b. dirty floating c. freely floating d. Bretton Woods e. None of these are correct.

Q: Use the information above to answer the following question. In the T-account above: A) (a) and (b) are credits. B) (c) through (g) are debits. C) if the sum of (a) and (b) is less than the sum of (c) through (g), the Cash account balance will increase. D) (a) and (b) are increases.

Q: If U.S. interest rates suddenly become much higher than European interest rates (and if this does not cause concern about higher inflation in the United States), the U.S. demand for euros would ____, and the supply of euros to be exchanged for dollars would ____, other factors held constant.​ a. ​increase; increase b. ​increase; decrease c. ​decrease; increase d. ​decrease; decrease

Q: Use the information above to answer the following question. What is the ending balance of the Cash account? A) $219,300 B) $113,300 C) $28,500 D) $134,500

Q: ____ forecasting involves the use of historical exchange rate data to predict future values.​ a. ​Technical b. ​Fundamental c. ​Market-based d. ​Mixed

Q: The Accounts Receivable account: A) has a normal credit balance. B) is increased by a debit. C) is a liability. D) is increased when a company receives cash from its customers.

Q: A(n) ____ in the supply of euros for sale will cause the euro to ____. a. increase; appreciate b. increase; depreciate c. decrease; depreciate d. None of these are correct.

Q: The Accounts Payable account: A) has a normal credit balance. B) is increased by a debit. C) is an asset. D) is increased when a company receives cash from customers.

Q: According to interest rate parity, if the interest rate in a foreign country is ____ than in the home country, the forward rate of the foreign currency will have a ____. a. higher; discount b. lower; premium c. higher; premium d. higher; discount AND lower; premium

Q: Within the debit/credit framework, the best interpretation of the word credit is: A) left side of an account. B) increase side of an account. C) right side of an account. D) decrease side of an account.

Q: ____ are not foreign exchange derivatives. a. Forward contracts b. Currency futures contracts c. Currency swaps d. Currency options e. All of these are foreign exchange derivatives.

Q: How do debits appear in a T-account? A) They are listed on the left side for asset accounts, but listed on the right side for liabilities and stockholders' equity accounts. B) They are always listed on the right side of the account. C) They are always listed on the left side of the account. D) They are listed on the right side for asset accounts, but listed on the left side for liabilities and stockholders' equity accounts.

Q: Which of the following is NOT a method of forecasting exchange rates? a. using the forward rate for a currency to predict the future spot rate b. using a time-series model that examines moving averages and allows the forecaster to identify patterns in a currencys movements c. using the volatility of future exchange rate movements d. examining current values for economic variables along with their historical impact on a currencys value

Q: Accounts Payable had a balance of $18,200 at the beginning of the month. During the month, three debits in the amounts of $4,700, $11,300, and $14,800 were posted to Accounts Payable, and three credits in the amounts of $3,600, $9,500, and $12,700 were posted to Accounts Payable. What is the ending balance of the Accounts Payable account? A) $13,200. B) $5,000. C) $23,200. D) $49,000.

Q: ​The Bretton Woods era was the era a. ​of free-floating exchange rates. b. ​of floating rates without boundaries, but subject to government intervention. c. ​in which governments maintained exchange rates within 1 percent of a specified rate. d. ​in which exchange rates were maintained within 10 percent of a specified rate.

Q: Which of the following statements regarding debits and credits is always correct? A) Debits decrease accounts while credits increase them. B) The total value of all debits recorded in the ledger must equal the total value of all credits recorded in the ledger. C) The total value of all debits to a particular account must equal the total value of all credits to that account. D) The normal balance for an account is the side on which it decreases.

Q: If the U.S. government imposed trade restrictions on U.S. imports, this would ____ the U.S. demand for foreign currencies and would place ____ pressure on the values of foreign currencies (with respect to the dollar).​ a. ​increase; upward b. ​increase, downward c. ​limit; upward d. ​limit; downward

Q: Use the information above to answer the following question. What is the amount of total liabilities at the end of the year? A) $6,000. B) $15,600. C) $16,000. D) $5,600.

Q: The act of capitalizing on the discrepancy between the forward rate premium and the interest rate differential is called​ a. ​triangular arbitrage. b. ​locational arbitrage. c. ​covered interest arbitrage. d. ​interest rate parity.

Q: Use the information above to answer the following question. What is the amount of total assets at the end of the year? A) $16,000. B) $5,600. C) $15,000. D) $15,600.

Q: If European inflation suddenly becomes much higher than U.S. inflation, the U.S. demand for European goods will ____. In addition, the supply of euros to be sold for dollars will ____; both forces will place ____ pressure on the value of the euro. a. increase; decline; upward b. increase; decline; downward c. decrease; increase; upward d. decrease; increase; downward e. None of these are correct.

Q: Use the information above to answer the following question. What is the amount of stockholders equity at the end of the year? A) $9,450. B) $15,750. C) $15,050. D) $14,450.

Q: If a commercial bank expects the euro to appreciate against the dollar, it may take a ____ position in euros and a ____ position in dollars.​ a. ​short; short b. ​long; short c. ​short; long d. ​long; long

Q: Use the information above to answer the following question. What is the amount of the change in stockholders equity during the year? A) $5,750 increase B) $700 decrease C) $6,300 decrease D) $550 increase

Q: If the spot rate ____ the exercise price, a currency ____ option will not be exercised. a. remains below; call b. remains below; put c. remains above; call d. remains below; call AND remains below; put

Q: Use the information above to answer the following question. What is the amount of the total liabilities to be reported on the balance sheet? A) $60,000. B) $0 C) $90,000. D) $80,000.

Q: The exchange rate between two foreign (nondollar) currencies is known as a(n) a. indirect dollar rate. b. forward rate. c. cross-exchange rate. d. derived exchange rate.

Q: Use the information above to answer the following question. What is the amount of the total assets to be reported on the balance sheet? A) $150,000. B) $160,000. C) $90,000. D) $80,000.

Q: In the Wall Street Journal, you observe that the British pound () is quoted at $1.65. The Australian dollar (A$) is quoted at $0.60. What is the value of the Australian dollar in British pounds? a. A$2.75 b. A$0.36 c. 2.75 d. 0.36 e. None of these are correct.

Q: When accounts receivable are collected: A) stockholders equity increases. B) total assets increase. C) total assets decrease. D) the amount of total assets is unchanged.

Q: At any given point in time, the price at which banks will buy a currency is ____ the price at which they sell it. a. higher than b. lower than c. the same as d. None of these are correct.

Q: On January 1, Kirk Corporation had total assets of $850,000. During the month, the following activities occurred: Kirk Corporation acquired equipment costing $6,000, promising to pay cash for it in 60 days. Kirk Corporation purchased $3,500 of supplies for cash. Kirk Corporation sold land which it had acquired 2 years ago. The land had cost $15,000 and it was sold for $15,000 cash. Kirk Corporation signed an agreement to rent additional storage space next month at a charge of $1,000 per month. What is the amount of total assets of Kirk Corporation at the end of the month? A) $859,500. B) $856,000. C) $837,500. D) $840,000.

Q: Which of the following statements is NOT correct? a. Central banks often consider adjusting a currency's value to influence economic conditions. b. If the U.S. central bank wishes to stimulate the economy, it could weaken the dollar. c. A weaker dollar could cause U.S. inflation by reducing foreign competition. d. Direct intervention occurs when the central bank influences the factors that determine the dollar's value.

Q: Which of the following does NOT influence the supply of and demand for a currency? a. differential interest rates b. differential inflation rates c. direct government intervention d. indirect government intervention e. All of these affect the supply of and demand for a currency.

Q: A company purchased land costing $27,000 by paying cash of $6,750 and signing a 90-day note for the balance. The entry to record this transaction would: A) increase total assets. B) decrease total liabilities. C) decrease Common Stock. D) increase total assets and decrease total liabilities.

Q: A speculator who expects the euro to appreciate might a. purchase euros forward, and when they are received, sell them in the spot market. b. sell euros forward, and then purchase them in the spot market just before fulfilling the forward obligation. c. sell futures contracts on euros, and then purchase euros in the spot market just before fulfilling the futures obligation. d. All of these are correct.

Q: Park & Company was recently formed with a $5,000 investment in the company by stockholders in exchange for common stock. The company then borrowed $2,000 from a local bank, purchased $1,000 of supplies on account, and also purchased $5,000 of equipment by paying $2,000 in cash and signing a promissory note for the balance. Based on these transactions, the company's total assets are: A) $7,000. B) $9,000. C) $10,000. D) $11,000.

Q: ​A system whereby exchange rates are market determined without boundaries but subject to government intervention is called a. ​a dirty float. b. ​a free float. c. ​the gold standard. d. ​the Bretton Woods era.

Q: A company issues $20 million in new stock. The company later uses this money to acquire a building. What is the effect of these two transactions on the companys accounts? A) Buildings increases and Common Stock increases. B) Buildings increases and Common Stock decreases. C) Cash increases, Buildings increases, and Common Stock increases. D) Cash decreases, Buildings increases, and Common Stock decreases.

Q: If total liabilities decreased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during the same time period? A) $20,000 increase B) $20,000 decrease C) $30,000 increase D) $30,000 decrease

Q: If the forward rate of a foreign currency ____ the existing spot rate, the forward rate will exhibit a ____. a. exceeds; discount b. is below; premium c. is below; discount d. exceeds; discount AND is below; premium

Q: A company receives $100,000 cash from investors in exchange for stock. Several weeks later, the company buys a $250,000 machine using all of the cash from the stock issue and signing a promissory note for the remainder. The accounts involved in these two transactions are: A) Cash; Equipment; Noncurrent Investments; and Accounts Payable. B) Cash; Noncurrent Investments; Common Stock; and Notes Payable. C) Cash; Equipment; Common Stock; and Notes Payable. D) Equipment; Notes Payable; and Retained Earnings.

Q: Which of the following statements is NOT correct regarding forward contracts? a. They are typically negotiated with a commercial bank b. They are standardized contracts that represent a standard number of units and have a specific maturity date. c. They are sometimes referred to in terms of their percentage premium or discount. d. They can be used to hedge a corporation's risk that a currency's value may appreciate or depreciate over time.

Q: A company borrows $2 million from its bank. It then uses this money to buy equipment. How do these two transactions affect the companys accounting equation? A) Assets and liabilities both increase by $2 million. B) Assets increase by $2 million and liabilities decrease by $2 million. C) Assets increase by $4 million, liabilities increase by $2 million, and stockholders equity increases by $2 million. D) Assets remain unchanged and liabilities increase by $2 million.

Q: If the demand for British pounds ____, the pound will ____, other things being equal. a. increases; appreciate b. decreases; appreciate c. increases; depreciate d. decreases; appreciate AND increases; depreciate

Q: A company issues $20 million in new stock. It later uses the cash received to pay off promissory notes. What accounts are affected by these two transactions? A) Common Stock, Cash, and Notes Payable. B) Common Stock, Cash, Investments, and Notes Payable. C) Cash, Common Stock, and Accounts Payable. D) Common Stock, Investments, and Notes Payable.

Q: If U.S. inflation suddenly becomes much higher than European inflation, the U.S. demand for European goods will ____. In addition, the supply of euros to be sold for dollars will ____; both forces will place ____ pressure on the value of the euro. a. increase; decline; upward b. increase; decline; downward c. decrease; increase; upward d. decrease; increase; downward e. None of these are correct.

Q: Your company pays back $2 million on a loan it had obtained earlier from a bank. A) Assets decrease by $2 million; liabilities and stockholders' equity are both unchanged. B) Assets decrease by $2 million, liabilities decrease by $2 million, and stockholders' equity is unchanged. C) Assets decrease by $2 million and liabilities increase by $2 million. D) Assets decrease by $2 million, liabilities are unchanged, and stockholders equity decreases by $2 million.

Q: ​The speculative risk of purchasing a ____ is that the foreign currencys value ____ over time. a. ​put option; increases b. ​put option; decreases c. ​call option; increases d. ​futures contract; increases

Q: Which of the following is typically used as the basis of a market-based forecast? a. the currencys spot rate b. a time-series model showing the currencys moving average c. the currencys volatility index d. the currencys forward rate e. the currency's spot rate AND the currency's forward rate

Q: In part, a transaction affects the accounting equation by decreasing an asset. There is no effect on liabilities. Which of the following statements is correct with regards to this transaction? A) If other assets are unchanged, stockholders' equity must be increasing. B) If other assets are unchanged, stockholders' equity must be decreasing. C) If stockholders' equity is unchanged, another asset must be decreasing. D) If stockholders' equity is unchanged, other assets must be unchanged.

Q: A country that pegs its currency is still able to maintain complete control over its local interest rates. a. True b. False Indicate the answer choice that best completes the statement or answers the question.

Q: Which of the following applies to Accounts Payable? A) They can be outstanding for more than one year. B) They charge interest. C) It is an amount a business is obligated to repay. D) They are documented using formal documents.

Q: What is the minimum number of accounts that must be involved in any transaction? A) One B) Two C) Three D) There is no minimum.

Q: When the Federal Reserve attempts to lower interest rates by increasing the U.S. money supply and has no impact on inflationary expectations, it puts upward pressure on the value of the dollar. a. True b. False