Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Textbook Question
Chapter 1, Problem 3EA
You have been asked to compare the sales and assets of four companies that make computer chips to determine which company is the largest in each category. You have gathered the following data, but they cannot be used for direct comparison because each company’s sales and assets are in its own currency:
Assuming that the exchange rates in Exhibit 2 are current and appropriate, convert all the figures to U.S. dollars (multiply amount by exchange rate) and determine which company is the largest in sales and which is the largest in assets.
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You are the manager of a U.S. company situated in Los Angeles and manages the import/export
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to the U.S.A from Europe and also exports goods manufactured in the U.S.A. to Canada.
Therefore, your company is very much dependent an the impact of current and future exchange
rates on the performance of the company.
Scenario 1:
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currencies of the major other countries that you deal with in terms of bath imports and exparts. The
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€/S
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You also obtain the following annual risk free rates applying in the countries:
U.S.A.
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France…
Suppose that Salem Co, a U.S.-based MNC that both purchases supplies from Canada and sells exports in Canada, is seeking to measure the economic exposure of its cash flows. Salem wishes to analyze how its cash flows might change under different exchange rates for the Canadian dollar (the only foreign currency in which it deals).
Salem believes that the value of the Canadian dollar will be $0.70, $0.75, or $0.80, and seeks to analyze its cash flows under each of these scenarios.
The following table shows Salem’s cash flows under each of these exchange rates.
Use the table to answer the question that follows.
Exchange Rate Scenario
Exchange Rate Scenario
Exchange Rate Scenario
C$1=$0.70
C$1=$0.75
C$1=$0.80
(Millions)
(Millions)
(Millions)
Sales
(1) U.S. Sales
$315
$315
$315
(2) Canadian Sales
$3.50
$4.00
$4.00
(3) Total Sales in U.S. $
$318.50
$318.75
$319.00
Cost of Materials and Operating Expenses
(4)…
Suppose that Salem Co, a U.S.-based MNC that both purchases supplies from Canada and sells exports in Canada, is seeking to measure the economic
exposure of its cash flows. Salem wishes to analyze how its cash flows might change under different exchange rates for the Canadian dollar (the only
foreign currency in which it deals).
Salem estimates it's cash flows from both the U.S., in dollars, and Canada, in Canadian dollars. These figures are summarized in the following table.
U.S. Canada
Sales
-Cost of materials
$315
C$5
$45
C$150
-Operating expenses
$55
-Interest expenses
$5
C$10
Cash flows
$210
-$C155
Salem believes that the value of the Canadian dollar will be $0.70, $0.75, or $0.80, and seeks to analyze its cash flows under each of these scenarios.
The following table shows Salem's cash flows under each of these exchange rates.
For each exchange rate scenario, fill in rows (2), (3), (5), (6), (9), and (10). Finally, fill in the last row for net cash flows in U.S. dollars for each…
Chapter 1 Solutions
Principles of Accounting
Ch. 1 - What makes accounting a valuable discipline?Ch. 1 - Prob. 2DQCh. 1 - Prob. 3DQCh. 1 - How are expenses and withdrawals similar, and how...Ch. 1 - How do generally accepted accounting principles...Ch. 1 - Why do managers in governmental and not-for-profit...Ch. 1 - Prob. 1SECh. 1 - Match the descriptions that follow with the...Ch. 1 - Determine the amount missing from each accounting...Ch. 1 - Use the accounting equation to answer each...
Ch. 1 - Use the accounting equation to answer each...Ch. 1 - Prob. 6SECh. 1 - Use the following accounts and balances to prepare...Ch. 1 - Randall Company engaged in activities during the...Ch. 1 - Prob. 9SECh. 1 - Prob. 10SECh. 1 - Prob. 1EACh. 1 - Financial accounting uses money measures to gauge...Ch. 1 - You have been asked to compare the sales and...Ch. 1 - Use the accounting equation to answer each...Ch. 1 - Daiichi Companys total assets and liabilities at...Ch. 1 - 1. Indicate whether each of the following accounts...Ch. 1 - Listed in random order are some of Oxford Services...Ch. 1 - Dukakis Company had the following accounts and...Ch. 1 - Prob. 9EACh. 1 - Prob. 10EACh. 1 - Complete the financial statements that follow by...Ch. 1 - Prob. 12EACh. 1 - Match the terms that follow with the appropriate...Ch. 1 - Prob. 14EACh. 1 - Prob. 15EACh. 1 - Prob. 1PCh. 1 - The following three independent sets of financial...Ch. 1 - Fuel Designs financial accounts follow. The...Ch. 1 - The accounts of Frequent Ad, an agency that...Ch. 1 - Athena Riding Clubs financial statements follow.Ch. 1 - A list of financial statement items follows....Ch. 1 - Three independent sets of financial statements...Ch. 1 - Prob. 8APCh. 1 - Prob. 9APCh. 1 - Aqua Swimming Clubs financial statements follow....Ch. 1 - Costco Wholesale Corporation is Americas largest...Ch. 1 - Prob. 2CCh. 1 - Prob. 3CCh. 1 - Prob. 4CCh. 1 - Refer to the CVS annual report and the financial...
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Foreign Exchange Risks; Author: Kaplan UK;https://www.youtube.com/watch?v=ne1dYl3WifM;License: Standard Youtube License