A U.S. entity is concerned that changing exchange rates will
result in a loss on a foreign currency to be received in the
future. To hedge the risk of possible loss, the entity should
acquire a forward contract to
Question 2
During 2005 both Raim Co. and Cane Co. suffered losses due
to the flooding of the Mississippi River. Raim is located two
miles from the river and sustains flood losses every two to
three years. Cane, which has been located fifty miles from the
river for the past twenty years, has never before had flood
losses. How should the flood losses be reported in each
company's 2005 income statement?
Question 3
On September 1, 2008, Bain Corp. received an order for
equipment from a foreign customer for 300,000 local currency
units (LCU) when the U.S. dollar equivalent was $96,000. Bain
shipped the equipment on October 15, 2008, and billed the
customer for 300,000 LCU when the U.S. dollar equivalent was
$100,000. Bain received the customer's remittance in full on
November 16, 2008, and sold the 300,000 LCU for $105,000. In
its income statement for the year ended December 31, 2008,
Bain should report a foreign exchange gain of:
Question 4
The following information is relevant to the computation of
Chan Co.'s earnings per share to be disclosed on Chan's
income statement for the year ending December 31: Chan has