In the year in which the sale was made, 20X

29 Jun In the year in which the sale was made, 20X

Question
29. The time value of an option is the difference between the

a. premium paid and its current rate.

b. premium paid and its intrinsic value.

c. exercise price and its current rate.

d. call option price and the put option price.

30. The two distinguishing characteristics of a financial instrument are

a. one or more options and one or more exchange rates.

b. one or more underlyings and one or more notional amounts.

c. cash flows and economic exchange.

d. a per share price and a quantity.

31. Hugh, Inc. purchased merchandise for 300,000 FC from a British vendor on November 30, 20X3. Payment in British pounds is due January 31, 20X4. Exchange rates to purchase 1 FC is as follows:

……………..

Spot

Nov. 30, 20X3

Dec. 31, 20X3

$1.65
$1.62

30

day……………

$1.64

$1.59

60

day……………

$1.63

$1.56

In the December 31, 20X3 income statement, what amount should Hugh report as foreign exchange gain from this transaction?

a. $12,000

b. $9,000

c. $6,000

d. $0

32. Wild, Inc. sold merchandise for 500,000 FC to a foreign vendor on November 30, 20X5. Payment in foreign currency is due January 31, 20X6. Exchange rates to purchase 1 foreign currency unit are as follows:

………….

Spot

Nov. 30, 20X5

Dec. 31, 20X5

Jan. 31, 20X6

$1.49
$1.45

$1.44

30

day………..

$1.48

$1.43

$1.43

60

day………..

$1.46

$1.41

$1.42

In the year in which the sale was made, 20X5, what amount should Wild report as foreign exchange gain/loss from this transaction?

a. $25,000

b. $20,000

c. $5,000

d. $0

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