Q&A Hero

Q: Active trading in markets and competition among securities analysts helps ensure that: I. Security prices approach informational efficiency. II. Riskier securities are priced to offer higher potential returns. III. Investors are unlikely to be able to consistently find under- or overvalued securities. A. I only B. I and II only C. II and III only D. I, II, and III

Q: According to the Flow of Funds Accounts of the United States, the largest financial asset of U.S. households is ____. A. mutual fund shares B. corporate equity C. pension reserves D. deposits

Q: ____ is not a derivative security. A. A share of common stock B. A call option C. A futures contract D. None of the options (All of the answers are derivative securities.)

Q: Net worth represents _____ of the liabilities and net worth of commercial banks. A. about 51% B. about 91% C. about 11% D. about 31%

Q: Real assets in the economy include all but which one of the following? A. land B. buildings C. consumer durables D. common stock

Q: Financial assets represent _____ of total assets of U.S. households. A. over 70% B. over 90% C. under 10% D. about 30%

Q: In the current year, Logic Co. purchased bonds of Waterford Co. with a cost of $125,000 and a year-end fair value of $123,700. Logic also purchased 1,500 shares of Jasper Co. common stock with a cost of $25,000 and a year-end fair value of $26,100. These are classified as long-term available-for-sale securities. Prepare the journal entry to record the market value of the investments as of its December 31 year-end.

Q: Washington Corp. held 1,500 of Vashon Company common stock with a cost of $74,387. These shares were classified as a Long-Term available-for-sale investment. It sold the shares on December 13 for $55,275. Prepare the journal entry to record Washington's sale.

Q: Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. These shares were classified as a long-term available-for-sale investment. It sold the shares on December 13 for $42,100. Prepare Lander's journal entry to record this sale.

Q: On October 31, Augustas Co. received cash dividends of $0.15 per share from its investment in Lamb Corp.'s common stock. Augustas owned 1,200 shares of Lamb Corp.'s stock on October 31. The investment is considered available-for-sale. Prepare the investor's journal entry to record the receipt of the cash dividends.

Q: Mire Corporation had the following transactions involving investments in trading securities during the year. Prior to these transactions, Mire had never had any investments in trading securities. Prepare the required general journal entries to record these transactions. Feb. 16 Purchased 800 shares of HM Corporation stock at $28 per share plus a $400 brokerage fee. Feb. 26 Purchased 500 shares of Sugarland Co. stock at $19 per share plus a $300 brokerage fee. Mar. 2 Received a $0.95 per share dividend from the HM Corporation. Mar. 28 Sold 200 shares of HM Corporation stock for $31 per share less a $150 brokerage fee. Apr. 20 Sold 150 shares of Sugarland Co. stock at $17 per share less a $100 brokerage fee. Apr. 30 The company is preparing quarterly financial statements; prepare an adjusting entry for the fair value adjustment on the trading securities. At April 30, the HM stock has a fair value of $30 per share, and the Sugarland stock has a fair value of $16 per share.

Q: Scotsland Company had the following transactions relating to investments in trading securities during the year. Prepare the required general journal entries for these transactions. May 4 Scotsland purchased 600 shares of Lobe Company stock at $120 per share plus a $750 brokerage fee. July 1 Scotsland received a $2.50 per share cash dividend on the Lobe Company stock. Sept. 15 Sold 300 shares of Lobe Company stock for $125 per share, less a $450 brokerage fee. Dec. 31 The fair value of the Lobe Company stock (the only investment that Scotsland owns) is $124 per share. The balance of the Fair value AdjustmentTrading account had a zero balance prior to adjustment.

Q: Element Company had the following long-term available-for-sale securities in its portfolio at December 31 for each of the years listed. The year-end cost and fair values for its portfolio follow. Beginning with Year 1, prepare the appropriate journal entry to record each year-end market adjustment for these securities. Available-for-Sale Securities Cost Fair Value Year 1 $ 404,500 $ 389,900 Year 2 406,400 412,600 Year 3 454,800 472,000

Q: Hubbard Company had the following trading securities in its portfolio at December 31. The Fair Value AdjustmentTrading account had a balance of zero prior to year-end adjustment. Prepare the appropriate adjusting journal entry. Short-Term Investments Cost Fair Value XBM $ 24,500 $ 25,900 Micro 51,000 48,600 Outel 62,300 61,000 Dull 29,900 30,200 Totals $167,700 $165,700

Q: A company reported net income of $225,000, net sales of $2,500,000, and average total assets of $2,100,000 for the current year. Calculate this company's profit margin, total asset turnover, and return on total assets.

Q: A company had net income of $45,000, net sales of $390,000, and average total assets of $450,000 for the current year. Calculate the company's profit margin, total asset turnover, and return on total assets.

Q: A company had net income of $350,000 in Year 1 and $520,000 in Year 2. The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2. Calculate the return on total assets for Year 1and Year 2. Comment on the results, did the company's performance improve?

Q: A company reported net sales of $850,000, net income of $200,000 and average total assets of $575,000. Calculate its return on total assets.

Q: A company paid $600,000 for 10% bonds with a par value of $600,000 on September 1. The bonds pay 5% interest semiannually on September 1 and March 1. The company intends to hold the bonds until they mature. Prepare the journal entries for the following dates and transactions related to this bond acquisition. (1) Bonds purchased on September 1. (2) Year-end adjusting entry, December 31. (3) Receipt of semiannual interest March 1. (4) Redemption of the bonds at maturity on August 31.

Q: On May 1 of the current year, a company paid $200,000 cash to purchase 6%, 10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1. The company intends to hold these bonds until they mature. Prepare the journal entry for the accrual of interest for the year-end December 31.

Q: On April 1 of the current year, a company paid $150,000 cash to purchase 7%, 10-year bonds with a par value of $150,000; interest is paid semiannually each April 1 and October 1. The company intends to hold these bonds until they mature. Prepare the journal entries to record the bond purchase, the receipt of the first semiannual interest payment on October 1 of the current year, and the accrual of interest for the year-end December 31.

Q: Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

Q: Explain how equity securities having significant influence are accounted for and reported in the financial statements. Include a discussion of the criterion for these securities in terms of an investee's voting stock.

Q: Explain how to account for available-for-sale debt and equity securities at and after acquisition and how they are reported in financial statements.

Q: Explain how to account for held-to-maturity debt securities at and after acquisition and how they are reported in the financial statements.

Q: Explain how to record the sale of trading securities.

Q: Define the return on total assets and explain how it is used to measure a company's financial performance.

Q: Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

Q: Explain how investors report investments in equity securities when the investor has a controlling influence over an investee.

Q: What is comprehensive income and how is it usually reported in the financial statements?

Q: What are the accounting basics for debt securities, including recording their acquisition, interest earned, and their disposal?

Q: Identify the classifications for non-influential investments in securities.What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

Q: Discuss the reasons companies make investments.

Q: Explain the difference between short-term and long-term investments. Cite examples of each.

Q: D; 2. C; 3. J; 4. G; 5. E; 6. B; 7. H; 8. I; 9. F; 10. A Short Answer Questions

Q: Match the following terms with the appropriate definitions. A. Equity method B. Available-for-sale securities C. Subsidiary D. Long-term investments E. Parent company F. Return on total assets G. Consolidated financial statements H. Held-to-maturity securities I. Trading securities J. Unrealized gain (loss) _______ (1) Investments in equity and debt securities that are not readily convertible to cash or are not intended to be converted to cash in the short term. _______ (2) A corporation controlled by another company when the controlling company owns more than 50% of the investee's voting stock. _______ (3) Change in market value that is not yet realized through an actual sale. _______ (4) Financial statements that show the financial position, results of operations, and cash flows of all entities under the parent's control, including those of any subsidiaries. _______ (5) A company that owns a more than 50% controlling interest in a subsidiary. _______ (6) Debt and equity securities not classified as trading or held-to-maturity. _______ (7) Debt securities that a company intends and is able to hold until maturity. _______ (8) Debt and equity securities that a company intends to actively manage and trade for profit. _______ (9) A measure of operating efficiency, computed as net income divided by average total assets. _______(10)An accounting method for long-term investments in equity when the investor has significant influence over the investee.

Q: The two business entities involved in an investment in securities with controlling influence, for which consolidated financial statements are prepared, are known as: A. Parent and Investor B. Subsidiary and Investee C. Consolidator and Parent D. Parent and Subsidiary E. Both are referred to as partners.

Q: Financial statements that show the financial position, results of operations, and cash flows of all entities under the parent company's control, including all subsidiaries are known as: A. Combined financial statements B. Consolidated financial statements C. Equity financial statements D. Statement of owner's equity E. Investor financial statements

Q: On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The fair value of the remaining 3,500 shares is $29.50 per share. The amount that Jewel Company should report in the asset section of its year-end December 31 balance sheet for its investment in Marcelo Corp. is: A.$200,110. B.$103,250. C.$2,245. D.$3,195. E.$5,440.

Q: Landmark Corp. buys $300,000 of Schroeter Company's 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the five year life. When the bonds mature, the journal entry to record the proceeds will be: A.Debit Long-Term Investments-HTM $300,000; credit Cash $300,000. B.Debit Cash $300,000; credit Interest Revenue $300,000. C.Debit Cash $300,000; credit Long-Term Investments-HTM $300,000. D.Debit Cash $300,000; credit Interest Receivable $300,000. E.Debit Cash $300,000; credit Bonds Payable $300,000.

Q: Landmark buys $300,000 of Schroeter Company's 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually on March 1 and September 1. The journal entry Landmark should record to accrue interest earned at year-end December 31 is: A.Debit Interest Receivable $8,000, credit Interest Revenue $8,000. B.Debit Interest Receivable $12,000, credit Interest Revenue $12,000. C.Debit Cash $8,000, credit Interest Revenue $8,000. D.Debit Cash $12,000, credit Interest Revenue $12,000. E.Debit Interest Revenue $8,000, credit Interest Receivable $8,000.

Q: Landmark Corp. buys $300,000 of Schroeter Company's 8% five-year bonds at par value on September 1. Interest payments are made semiannually. All of the following regarding accounting for the securities are true except: A.The debt securities should be recorded at the cost $300,000. B.The securities will have a maturity value of $300,000. C.The semiannual interest payment amount is $12,000. D.The semiannual interest payment amount is $24,000. E.Interest Revenue should be credited when an interest payment is received.

Q: All of the following statements regarding other comprehensive income are true except: A.Other comprehensive income includes unrealized gains and losses on available-for-sale securities. B.Other comprehensive income is not considered when calculating comprehensive income. C.Other comprehensive income includes foreign currency adjustments. D.Other comprehensive income includes pension adjustments. E.Accumulated other comprehensive income is defined as the cumulative impact of other comprehensive income.

Q: All of the following statements regarding accounting for trading securities under U.S. GAAP are true except: A.The entire portfolio of trading securities is reported at fair value. B.An unrealized gain or loss from a change in fair value is reported on the income statement. C.A realized gain or loss is recorded when the securities are sold and reported on the income statement. D.When the period-end fair value adjustment for the portfolio of trading securities is computed, it includes the cost and fair value of any securities sold. E.Any prior period fair value adjustment to the portfolio is not used to compute the gain or loss from sale of individual transactions.

Q: All of the following statements regarding accounting for influential securities under U.S. GAAP and IFRS are true except: A.Under the equity method, the share of investee's net income is reported in the investor's income in the same period the investee earns that income. B.Under the consolidation method, investee and investor revenues and expenses are combined. C.Under the equity method, the investment account equals the acquisition cost plus the share of investee income plus the share of investee dividends. D.Under the consolidation method, nonintercompany assets and liabilities are combined (eliminating the need for an investment account). E.U. S. GAAP companies commonly refer to noncontrolling interests in consolidated subsidiaries as minority interests whereas IFRS companies use noncontrolling interests.

Q: All of the following statements regarding accounting for noninfluential securities under U.S. GAAP and IFRS are true except: A.Trading securities are accounted for using fair values with unrealized gains and losses reported in other comprehensive income. B.Trading securities are accounted for using fair values with unrealized gains and losses reported in net income. C.Available-for-sale securities are accounted for using fair values with unrealized gains and losses reported in other comprehensive income. D.Held-to-maturity securities are accounted for using amortized cost. E.Both systems examine held-to-maturity securities for impairment.

Q: On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagome of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 on the date of sale. On December 31, when Higgins prepared its financial statements, the exchange rate was $0.00843. Kagome paid in full on January 12, when the exchange rate was $0.00861. On January 12, Higgins should prepare the following journal entry: A.Debit Cash $12,915; credit Accounts Receivable-Kagome $12,555; credit Foreign Exchange Gain $360. B.Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kagome $12,915. C.Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $90. D.Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kagome $12,915. E.Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $270.

Q: On June 18, Wyman Company (a U.S. Company) sold merchandise to the Nielsen Company of Denmark for €60,000 (Euros), with a payment due in 60 days. If the exchange rate was $1.35 per euro on the date of sale and $1.14 per euro on the date of payment, Johnson Company should recognize a foreign exchange gain or loss in the amount of: A.$60,000 gain. B.$60,000 loss. C.$68,400 loss. D.$12,600 gain. E.$12,600 loss.

Q: When a U.S. company makes a credit sale to an international customer and the sale terms are for payment in a foreign currency, the foreign exchange rate used to record the sale is the exchange rate: A.Thirty days from the date of sale. B.At the end of the seller's fiscal year. C.At the end of the buyer's fiscal year. D.On the date final payment is made. E.On the date of the sale.

Q: A U.S. company makes a sale to a foreign customer receivable in 30 days in the customer's currency. The sale would be recorded by the U.S. company on the date: A.Of sale using a projected estimate of the U.S. dollar value at payment date. B.Of sale using a 30-day average U.S. dollar value. C.Of sale using the current dollar value. D.Of sale using the foreign currency value. E.When payment is received.

Q: On January 4, Year 1, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000. Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. What is the book value of Barber's investment in Convell at the end of Year 2? A.$60,500. B.$79,800. C.$52,000. D.$88,300. E.$87,300.

Q: Pravis Corporation owns 30% of Kuster Corporation. Pravis Corporation received $9,000 in cash dividends from Kuster Corporation. The entry to record receipt of these dividends is: A.Debit Cash, $9,000; credit Long-Term Investments, $9,000. B.Debt Long-Term Investment, $9,000; credit Cash, $9000. C.Debit Cash, $9,000; credit Interest Revenue, $9,000. D.Debit Unrealized Gain-Equity, $9,000; credit Cash, $9,000. E.Debit Cash, $9,000; credit Dividend Revenue, $9,000.

Q: Madison Corporation purchased 40% of Jay Corporation for $125,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $30,000. At year-end, Jay Corporation reported net income of $150,000. The balance in Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be: A.$ 77,000. B.$125,000. C.$173,000. D.$197,000. E.$370,000.

Q: Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1. On October 17 of the same year, Ferris Corporation declared total cash dividends of $12,000. At year-end, Ferris Corporation reported net income of $60,000. The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be: A.$ 80,800. B.$100,000. C.$ 95,200. D.$119,200. E.$124,000.

Q: Marjam Company owns 51,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock. MacKenzie Company pays $25,000 in total cash dividends to its shareholders. Marjam's entry to record this transaction should include a: A.Debit to Dividend Revenue for $12,750. B.Debit to Interest Revenue for $12,750 C.Credit to Long-Term investments for $12,750. D.Credit to Long-Term Investments for $25,000. E.Credit to Dividend Revenue for $25,000.

Q: McVeigh Corp. owns 40% of Gondor Company's common stock. McVeigh received $41,200 in cash dividends from Gondor. The entry to record this transaction should include a: A.Debit to Dividends for $103,000. B.Credit to Long-Term Investments for $41,200. C.Debit to Dividend Revenue for $41,200. D.Credit to Long-Term Investments for $103,000. E.Credit to Cash for $41,200.

Q: Zhang Corp. owns 40% of Magnor Company's common stock. Magnor pays $97,000 in total cash dividends to its shareholders. Zhang's entry to record this transaction should include a: A.Debit to Dividends for $97,000. B.Debit to Dividends for $38,800. C.Debit to Long-Term investments for $97,000. D.Credit to Long-Term Investments for $38,800. E.Credit to Cash for $97,000.

Q: Segmental Manufacturing owns 35% of Glesson Corp stock. Glesson pays a total of $47,000 in cash dividends for the period. Segmental's entry to record the dividend transaction would include a: A.Credit to Long-Term Investments for $16,450. B.Debit to Long-Term Investments for $16,450. C.Debit to Cash for $47,000. D.Credit to Cash for $16,450. E.Credit to Investment Revenue for $47,000.

Q: MotorCity, Inc. purchased 40,000 shares of Shaw common stock for $232,000. This represents 40% of the outstanding stock. The entry to record the transaction includes a: A.Debit to Long-Term Investments for $92,800. B.Debit to Long-Term Investments for $232,000. C.Credit to Long-Term Investments for $92,800. D.Debit to Long-Term Investments-HTM for $232,000. E.Debit to Short-Term Investment-AFS for $232,000.

Q: If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment, which method would the investor normally use to account for this investment? A.Equity method. B.Fair value method. C.Historical cost method. D.Cost with amortization method. E.Effective method.

Q: On March 15, Alan Company purchased 10,000 shares of Cameo Corp. stock for $35,000. The investment is classified as available-for-sale securities. On June 30, the stock had a fair value of $34,000. Alan should do which of the following: A.Record a decrease to the Fair value Adjustment-AFS account. B.Record an increase to the Unrealized LossEquity account. C.Report a decrease in the Gain on Sale of Investment income statement account. D.Report an increase in the asset section of the balance sheet. E.Record an increase to the Unrealized GainIncome account.

Q: On July 31, Potter Co. purchased 2,000 shares of GigaTech stock for $16,000. The investment is classified as available-for-sale securities. On October 31, which is Potter's year-end, the stock had a fair value of $20,000. Potter should record a: A.Credit to Unrealized Gain-Equity for $4,000. B.Credit to Market AdjustmentAvailable-for-Sale for $4,000. C.Credit to Investment Revenue for $4,000. D.Debit to Unrealized Loss-Equity for $4,000. E.Debit to Unrealized Gain-Equity for $4,000.

Q: Six months ago, a company purchased an investment in stock for $70,000. The investment is classified as available-for-sale securities. The current fair value of the stock is $68,500. The company should record a: A.Debit to Unrealized LossEquity for $1,500. B.Credit to Unrealized GainEquity for $1,500. C.Debit to Investment Revenue for $1,500. D.No entry is required. E.Credit to Investment Revenue for $1,500.

Q: Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 as a long-term investment. The investment is classified as available-for-sale securities. Gonzalez has 500,000 shares of stock currently outstanding and the par value of the stock is $1 per share. Lessington's entry to record the purchase transaction would include a: A.Debit to Long-Term Investments-AFS for $150,000. B.Credit to Common Stock for $150,000. C.Credit Gain on Long-Term Investment $146,000. D.Debit to Long-Term Investments-AFS for $4,000. E.Credit to Common Stock for $4,000.

Q: J.P. Industries purchased 2,000 shares of Yang's common stock for $143,000 as a long-term investment. The investment is classified as available-for-sale securities. The par value of the stock was $1 per share. J.P. paid $375 in commissions on the transaction. J.P.'s entry to record the purchase transaction would include a: A.Credit to Common Stock for $2,000. B.Credit to Common Stock for $143,000. C.Credit to Common Stock for $143,375. D.Debit to Long-Term Investments-AFS for $143,000. E.Debit to Long-Term Investments-AFS for $143,375.

Q: All of the following are true for Available-for-sale equity securities except: A.Are recorded at cost when acquired. B.May earn dividends that are reported in that year's income statement. C.May be classified as either short-term or long-term securities. D.Are reported at market value on the balance sheet. E.Are actively managed like Trading Securities.

Q: Available-for-sale debt securities are: A.Recorded at cost and remain at cost over the life of the investment. B.Reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value. C.Reported at fair value on the balance sheet. D.Intended to be held to maturity. E.Always classified as Long-Term Investments.

Q: Held-to-maturity securities are: A.Always classified as Short-Term Investments. B.Always classified as Long-Term Investments. C.Debt securities that a company intends and is able to hold to maturity. D.Equity securities that a company intends and is able to hold to maturity. E.Equity securities where significant influence involved.

Q: A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n): A.Contingent loss. B.Realizable loss. C.Unrealized loss. D.Capitalized loss. E.Market loss.

Q: Investments in trading securities: A.Include only equity securities. B.Are reported as current assets. C.Include only debt securities. D.Are reported at their cost, no matter what their market value. E.Are long-term investments.

Q: Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in: A.Available-for-sale securities. B.Held-to-maturity securities. C.Trading securities. D.Realizable securities. E.Liquid securities.

Q: Investments can be classified as all but which of the following: A.Intangible investments. B.Held-to-maturity debt securities. C.Available-for-sale debt securities. D.Available-for-sale equity securities. E.Trading securities.

Q: A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was: A.5.71% B.8.66% C.12.34% D.13.61% E.19.32%

Q: A company has net income of $250,000, net sales of $2,000,000, and average total assets of $1,500,000. Its return on total assets equals: A.12.5%. B.13.3%. C.16.7%. D.75.0%. E.600.0%.

Q: Canberry Corporation had net income of $80,000, beginning total assets of $640,000 and ending total assets of $580,000. Its return on total assets is: A.13.1% B.12.5% C.13.8% D.800% E.725%

Q: Cloverton Corporation had net income of $30,000, net sales of $1,000,000, and average total assets of $500,000. Its return on total assets is: A.3% B.200% C.6% D.17% E.1.5%

Q: Select the correct statement from the following: A.Profit margin reflects a company's ability to produce net sales from total assets. B.Total asset turnover reflects the percent of net income in each dollar of net sales. C.Return on total assets can be separated into gross margin ratio and price-earnings ratio. D.High returns on total assets are desirable. E.Return on total assets analysis is beneficial in evaluating a company but is not useful for competitor analysis.

Q: Marshall Company sold supplies in the amount of € 25,000 (euros) to a French company when the exchange rate was $1.21 per euro. At the time of payment, the exchange rate decreased to $0.82. Marshall must record a: A.gain of $9,750. B.gain of $20,500. C.loss of $9,750. D.loss of $20,500. E.neither a gain nor loss.

Q: Kreighton Manufacturing purchased on credit 50,000 worth of production materials from a British company when the exchange rate was $1.97 per British pound. At the year-end balance sheet date the exchange rate increased to $2.76. If the liability is still unpaid at that time, Kreighton must record a: A.gain of $39,500. B.loss of $39,500. C.gain of $138,000. D.loss of $138,000. E.neither a gain nor loss.

Q: If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ____ worth of U.S. dollars. A.$ 0.2759 B.$0.82777 C.$1.82777 D.$2.48 E.$1.00