Multiple-Choice Questions on Foreign Currency Transactions Jon-Jan Restaurants purchased green rice a special variety of rice from China for 100000 renminbi on November 1 20X8. Payment is due on January 30 20X9. On November 1 20X8 the company also entered into a 90-day forward contract to purchase 100000 renminbi. The forward contract is not designated as a hedge. The rates were as follows: Date Spot Rate Forward Rate November 1 20X8 $0.120 $0.126 (90 days) December 31 20X8 0.124 0.129 (30 days) January 30 20X9 0.127
Required Select the correct answer for each of the following questions. 1. The entry on November 1 20X8 to record the forward contract includes a a. Debit to Foreign Currency Receivable from Exchange Broker 100000 renminbi. b. Debit to Foreign Currency Receivable from Exchange Broker $12600. c. Credit to Premium on Forward Contract $600. d. Credit to Dollars Payable to Exchange Broker $12600. 2. The entries on December 31 20X8 include a a. Debit to Financial Expense $300. b. Credit to Foreign Currency Payable to Exchange Broker $300. c. Debit to Foreign Currency Receivable from Exchange Broker $300. d. Debit to Foreign Currency Receivable from Exchange Broker $12600. 3. The entries on January 30 20X9 include a a. Debit to Dollars Payable to Exchange Broker $12000. b. Credit to Cash $12600. c. Credit to Premium on Forward Contract $600. d. Credit to Foreign Currency Receivable from Exchange Broker $12600. 4. The entries on January 30 20X9 include a a. Debit to Financial Expense $400. b. Debit to Dollars Payable to Exchange Broker $12600. c. Credit to Foreign Currency Units (renminbi) $12600. d. Debit to Foreign Currency Payable to Exchange Broker $12700. 5. The entries on January 30 20X9 include a a. Debit to Foreign Currency Units (renminbi) $12700. b. Debit to Dollars Payable to Exchange Broker $12700. c. Credit to Foreign Currency Transaction Gain $100. d. Credit to Foreign Currency Receivable from Exchange Broker $12600.