Premium Essay

Ch 12 Adv Accntng Answer

In: Other Topics

Submitted By rsyd15
Words 2405
Pages 10
Chapter 12
Derivatives and Foreign Currency: Concepts and Common Transactions
Answers to Questions

1

Derivative is the name given to a broad range of financial securities. Their common characteristic is that the derivative contract’s value to the investor is directly related to fluctuations in price, rate, or some other variable that underlies it. Interest rate, foreign currency exchange rate, commodity prices and stock prices are common types of prices and rate risks that companies hedge.

2

A Forward is negotiated directly with a counterparty, while a future is a standard contract traded on an exchange. The exchange traded instrument has less risk of non-performance, and is commonly cheaper to transact. But standard contracts might not fit all companies’ needs. The forward carries the risk of counterparty default, but each contract can be tailored to exact needs.

3

An option gives the holder the right to buy or sell the underlying at a set price. The writer of an option has the obligation to either buy or sell. Options are often traded on exchanges and have low transaction costs.
Because an option is an agreement on a single transaction, they are not helpful in managing the risk of a stream of future transactions. A swap is an agreement to exchange a series of future cash flows. These are often negotiated, but there are some standardized exchange-traded swaps.

4

Net settlement means the instrument can be settled in cash for the net value. The parties in a net settlement do not have to buy or sell physical products and then realize the cash flows. Only one payment needs to be made, either from the holder or the writer of the instrument.

5

A transaction is measured in a particular currency if its magnitude is expressed in that currency. Assets and liabilities are denominated in a currency if their amounts are fixed in terms…...

Similar Documents

Premium Essay

Finance Ch 12

...CHAPTER 12 – Practice Problems CASH FLOW ESTIMATION AND RISK ANALYSIS (12-1) Cash flow estimation F I K Answer: b EASY 1. Although it is extremely difficult to make accurate forecasts of the revenues that a project will generate, projects' initial outlays and subsequent costs can be forecasted with great accuracy. This is especially true for large product development projects. a. True b. False (12-1) Relevant cash flows F I K Answer: b EASY 2. Since the focus of capital budgeting is on cash flows rather than on net income, changes in noncash balance sheet accounts such as inventory are not included in a capital budgeting analysis. a. True b. False (12-1) Relevant cash flows F I K Answer: a EASY 3. If an investment project would make use of land which the firm currently owns, the project should be charged with the opportunity cost of the land. a. True b. False (12-2) Depreciation cash flows F I K Answer: a EASY 4. The primary advantage to using accelerated rather than straight-line depreciation is that with accelerated depreciation the present value of the tax savings provided by depreciation will be higher, other things held constant. a. True b. False (12-1) Opportunity costs F I Answer: a MEDIUM 5. Opportunity costs include those cash inflows that could be generated from assets the firm already owns if those assets are not used for the project being evaluated. a. True ...

Words: 1797 - Pages: 8

Premium Essay

Journal Entry Ii and Iii Ch. 8 - 12

...HIST. 109 READING JOURNAL(S) II & III CHAPTERS 5 - 12 In chapter five I learn quite a few key points in history I was not aware of. For one it appears that much of early America and Europe are in turmoil as there are several distinct conflicts that arise; most based on difference of opinion or beliefs. “The political fate of North America also remained in question, as the English, the French, and the Indians continued to struggle for supremacy over the continent; developments during the half-century after 1700 intensified both social diversity and political uncertainty, resulting in an increasing incidence of violent conflict.” I feel young Americas early development was all over the place as all its settlers were trying to figure out what worked best for themselves. Everything from religion, difference in opinion on the subject of slavery, and enlightenment had early Americans at each other throats. Even though a centuries worth of settlement had elapsed, no one seemed to legitimately “settle”. I feel like early Americans were over zealous; everyone had their own idea of how things should work in the new land and no one could make up their mind or settle on one image. This is to be expected in my opinion as there were those still faithful to backcountry beliefs, English immigrants, who contradicted with non-English immigrants ideals. It was that difference in beliefs that had drew cause for conflict and war. Britain tried to choke hold Americans into submission......

Words: 2179 - Pages: 9

Free Essay

Reaction/Reflection Paper #2 : Lowney, Chs. 11 & 12, Menocal, Pp. 174-188

...Professor: Dr Moulay- AFTS370-01 3/14/2013 Reaction/Reflection Paper #2 : Lowney, chs. 11 & 12, Menocal, pp. 174-188 We learned that Muslim’s invasion of Spain provided economic, architectural and social developments in this area. In these readings (Lowney’s and Menocal’s) we can see that Muslims also had significant importance in medical and mathematical world. Maimonides was one of the most important physicians in Jewish society and he had many intellectual contributions to Judaism. He had important position as a physician. The important part is that where Maimonides inherited his wisdom? His medical secrets were based on ancient authorities like Galen and Hippocrates which were forgotten in the West but revived in the Islamic East. There were many successful philosopher-doctors in Islamic world like Ibn Sina (Avicenna in the West). Ibn Sina’s book was translated by Gerard as a Canon of Medicine. It was the Europe’s first translation about health and medicine. Ibn Sina’s (Avicenna) knowledge pushed European’s medicine forward. Moreover, there was another Spanish Muslim Abu-l-Qasim, also known as Abulcasis who became the practical companion to Avicenna’s theoretical Canon. He have gotten his hands dirty and actually practiced surgeries like amputating limbs, removing bladder stones and artificial teeth from beef bone thanks to Ibn...

Words: 283 - Pages: 2

Premium Essay

Strategy in Its Best Ch.12

...Chapter Twelve CORPORATE SINGLE INDUSTRY STRATEGY - This chapter is related to organizational control, structure and culture. Learning Objectives * Understand how organizational design requires the right combination of structure, control, and culture. * Discuss how effective organizational design enables company to increase product differentiation, reduce costs, & build competitive advantage. * Explain importance of flat hierarchy & factors determining centralization/decentralization * Explain advantages of functional structure & why/when necessary to move to more complex structure. * Differentiate between complex forms of structure used for specific business-level strategies. - What comes first strategy or structure? During the 60s and 70s the strategy should follow your structure. The debate continues. Look at it based on the industry characteristics and the type of organization you are in. In the 90s researches argued that your structure should follow your strategy. As the strategy is more comprehensive than the structure, then structure should follow the strategy. The business environment is independent and the company is the dependent. Then we should follow the business environment. When we do the strategy, we examine the macro business environment the micro business environment the competitors analysis and......

Words: 4577 - Pages: 19

Premium Essay

Itsc 2439 Ch.1-12 Study Guides

...professionals to design and write programs fast enough to keep up with the demand for new applications. 6. All knowledge workers are computer professionals. 7. A knowledge worker is another name for a computer user. 8. Use of a computer’s graphical user interface means that users no longer have to remember which command to enter to perform a task. 9. To operate a graphical user interface, a user types keyboard commands to tell a computer which tasks to perform. ____ ____ ____ ____ ____ ____ ____ 10. The Information Technology department is a modern name for the Data Processing department. ____ 11. Distributed computing links large-scale systems and personal computers to meet both organizational and individual worker needs. ____ 12. Computer departments in most organizations today are called data processing departments. ____ 13. One way to classify end users is by whether they use a computer occasionally, frequently, or extensively in their work. ____ 14. A computer professional in an organization, such as a programmer, is generally considered to be an external user. ____ 15. PCs that are advertised in newspapers are usually complete end-user systems. ____ 16. Computer hardware sold today is so reliable it rarely needs repairs or replacement. ____ 17. A digital camera is an example of a computer peripheral. ____ 18. Technical support costs are generally included in the purchase price of a computer product, and are therefore free to users. ____ 19. Training......

Words: 28017 - Pages: 113

Premium Essay

Ch. 12 Study Guide

...Chapter 12 Study Guide – Week 3 Assignment a. The minimum selling price Ed Berg Jr. could quote without decreasing or increasing operating income is $13,800. Variable cost of boat: Direct material $5,000 Direct labor $8,000 Variable overhead (10% x 8000) = $800 $13,8000 Total overhead = $150,000, which is 25% of direct labor. Direct labor = 150,000/0.25= $600,000 Variable overhead rate = variable cost/direct labor = ($150,000-$90,000)/$600,000 = $60,000 divided by $600,000 = 10% b. An increase in income before taxes of $1,200 would result from accepting the offer of 15,000. Customer offer $15,000 Variable costs $13,800 Contribution to profit $1,200 2. The contribution margin approach focuses on the relationship between future costs incurred as a result of taking an order and the revenue the order will produce. The impact of a specific order on profits can be estimated and the lower limits on price can be observed. 3. The major pitfall to the contribution margin approach to pricing is its failure to recognize the fixed costs explicitly. Although they can be overlooked in the short run, the fixed costs must be covered in the long run if the business is to continue. 1. a.Total target return on investment = $25,000,000 x 0.20 = $5,000,000 Target returnon investment per unit = $5,000,000 / 125,000 = $40 Prospective selling price = $240 b.Total target return on investment = $25,000,000 x 0.20 = $5,000,000 Target return...

Words: 282 - Pages: 2

Premium Essay

Child Ch 12

...children become more systematic, critical, and educable. - Piaget constructed many experiments in order to explain children's understanding of classification (an example of logical concept). -For instance an examiner would show a child a bunch of nine flowers- seven yellow daisies and two white roses. The examiner makes sure the child knows the words flowers, daisies, and roses. Then the question is asked, "are there more daisies than flowers?" Until about age 7 most say, "more daisies". -Young children cant justify their answers. Some 6 or 7 year olds explain that "because daisies are daisies they cant be flowers." And by age 8 most children say "more flowers than daisies." -Piaget studied transitive inference, the ability to figure out )infer) the unspoken link (transfer) between one fact and another. - For example " John is taller than Jim. Jim is taller than David,. Who is taller, John or David?' Children cant answer the question because they do not have the ability to make implications. They only understand direct statements. -Children cant make such implications until about age 7, when the maturation of the hippo-campus occurs ( a major component of the brains of humans and other mammals. Plays an important role in long-term memory and spatial navigation,) -Another logical concept that is linked to transitive inference was a concept that Piaget called Seriation. - Seriation is imperative for memorizing the alphabet or for......

Words: 349 - Pages: 2

Free Essay

Ch. 12 and 13

...Chapter 12 7. A peak is the transition from the end of an expansion to the start of a contraction. A trough occurs at the bottom of a recession just as the economy enters a recovery. Contraction is the period from peak to trough. Expansion is the period from trough to peak. 8. a. Monetary policy is expansive and fiscal policy is expansive. This is consistent with a steeply upward-sloping yield curve because, while the expansionary policies stimulate the economy and decrease the short-term rate, high inflation in the future is expected which forces up the yield in longer maturity. 14. Expansionary (i.e., looser) monetary policy to lower interest rates would help to stimulate investment and expenditures on consumer durables. Expansionary fiscal policy (i.e., lower taxes, higher government spending, increased welfare transfers) would directly stimulate aggregate demand. 21. a. Oil well equipment Decline (environmental pressures, decline in easily-developed oil fields) b. Computer hardware Consolidation stage c. Computer software Consolidation stage d. Genetic engineering Start-up stage e. Railroads Relative decline 33. If the economy enters a recession, the firm will have $21 million after-tax profit. Chapter 13 15. k = rf + β [E(rM) – rf ] = 0.05 + 1.5 × (0.10 – 0.05) = 0.125 or 12.5% Therefore: P0 = "D1" /"k - g" = "$2.5" /"0.125 - 0.04" = $29.41 18. ROE = 20%, b = 0.3, EPS = $2, k = 12% P/E Ratio We can calculate the P/E......

Words: 763 - Pages: 4

Premium Essay

Organizational Behavior Ch. 9-12

...alternatives while withholding any criticism of those alternatives. Nominal group technique- a Group decision-making method in which individual members meet face to face to pool their judgments in a systematic but independent fashion. Electronic meeting – a meeting in which members interact on computers, allowing for anonymity of comments and aggregation of votes. Chapter 10: Understanding Work Teams Work Group –a group that interacts primarily to share information and to make decisions to help each group member perform within his or her area of responsibility Work Team – A group whose individual efforts result in performance that is greater than the sum of the individual inputs Exhibit 10-1 pg. 309 Problem-solving teams –groups of 5 to 12 employees from the same department who meet for a few hours each week to discuss ways of improving quality, efficiency, and the work environment. Self-managed work teams –groups of 10 to 15 people who take on responsibilities of their former supervisors Cross-Functional Teams –employees from about the same hierarchical level, but from different work areas, who come together to accomplish a task. Virtual Teams –teams that use computer technology to tie together physically dispersed members in order to achieve a common goal. Multiteam Systems – systems in which different teams need to coordinate their efforts to produce a desired outcome. Organizational Demography – the degree to which members of a work unit share a common......

Words: 1845 - Pages: 8

Premium Essay

Acc 440 Week 4 Individual Assignment Ch 12

...In this pack of ACC 440 Week 3 Learning Team Assignment Ch. 11 Textbook Exercises you will find the next information: Q11-1 Explain the difference between indirect and direct exchange rates. Q11-2 What is the direct exchange rate if a U.S. company received $1.3623 in Canadian currency in exchange for $1.00 in U.S. Currency? Q11-3 The U.S. dollar strengthened against the European euro. Will imports from Europe into the United States be more expensive or less expensive in U.S. dollars? Explain. Q11-4 Differentiate between a foreign transaction and a foreign currency transaction. Give an example of each. Q11-5 What types of economic factors affect currency exchange rates? Give an example of a change in an economic factor that result in a weakening of the local currency unit versus a foreign currency unit. Q11-6 How are assets and liabilities denominated in a foreign currency measure on the transaction date? On the balance sheet date? Q11-7 When are foreign currency transaction gains or losses recognized in the financial statements? Where are these gains or losses reported in the financial statements? Q11-8 Sun Company, a U.S. corporation, has an accounts payable of $200,000 denominated in Canadian dollars. If the direct exchange rate increases, will Sun experience a foreign currency transaction gain or loss on this payable? Q11-9 What are some ways a U.S. company can manage the risk of exchanges......

Words: 371 - Pages: 2

Premium Essay

Answers Comm217 Exam Ch. 1-4

...Review Chapters 1-4 Solutions Requirement 1 a) Unearned sales revenue ……………………………….. 2,400 Sales revenue …………………………………………. 2,400 COGS ………………………………………………….. 1,500 Inventory ………………………………………………. 1,500 b) Insurance Exp ………………………………………… 750* Prepaid Ins Exp ……………………………………….. *Calculation: 1800*5/12=750 c) Depreciation Exp …………………………………….. Acc Depreciation …………………………………….. *Calculation=( 72,800-3,800)/5=13,800 13,800 13,800 750 d) Supplies exp …………………………………………… 1,100* Supplies on hand ………………………………………. 1,100 *Calculations=2050-X=950 e) Interest exp …………………………………………….. 1,750* Interest payable ………………………………………… 1,750 *Calculation:35,000*6%=2,100 Accrued interest exp= 2,100*10/12=1,750 f) Income Tax Expense …………………………………… 1290* Income Tax Payable …………………………………….. 1290 *Calculations=4300*30%1290 1 Requirement 2 Fashion World Inc Income Statement For the period ended December 31, 2009 ($ dollars) Sales1 COGS2 Gross Profit Operating Expenses Rent Expenses Salary Expenses Insurance Exp Depr Expense Supplies expenses Operating Profit Profit before interest and taxes Interest expenses Profit before Income Tax Income Tax Expense (30%) Profit EPS3 224,550 158500 66,050 13,850 30,500 750 13800 1100 6,050 6,050 1,750 4,300 1290 3,010 3.01 1 2 Calculations: 222,150+2,400=224,550 Calculations: 157,000+1,500=158,500 3 Calculations: 3,010/1,000=3.01 2 Requirement 3 Revenue ……………………………………… 224,550 Income Summary ……………………………. Income Summary ……………………………. 221,540 COGS......

Words: 600 - Pages: 3

Premium Essay

Wiley Plus Chapter 12 Answers

...*Chapter 12 Questions 1. (a) What is a statement of cash flows? The statement of cash flows reports the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities of a company during a period in a format that reconciles the beginning and ending cash balances (b) Mark Paxson maintains that the statement of cash flows is an optional financial statement. Do you agree? Explain. Disagree. The statement of cash flows is required. It is the fourth basic financial statement. 2. What questions about cash are answered by the statement of cash flows? The statement of cash flows answers the following questions about cash: (a) Where did the cash come from during the period? (b) What was the cash used for during the period? and (c) What was the change in the cash balance during the period? 3. Distinguish among the three activities reported in the statement of cash flows. Operating activities include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income. Investing activities include: (a) purchasing and disposing of investments and productive long-lived assets and (b) lending money and collecting loans. Financing activities include: (a) obtaining cash from issuing debt and repaying amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying them dividends. 4. (a) What are the sources (inflows) of cash in a statement of......

Words: 1713 - Pages: 7

Free Essay

Eco 305 Wk 1 Homework Ch 2 - 12(a-B), 13(a-C), 14

...ECO 305 All Quiz and Homework, ECO 305 WK 3 Homework Ch 5 - 16(a-c), 17(a-d), 18(a-b); Ch 6 - 13(a-b), ECO 305 WeeK 3 Quiz 2 - Chapters 3 and 4 , ECO 305 WK 1 Homework Ch 2 - 12(a-b),13(a-c),14, ECO 305 WK 2 Homework Ch 3 - 13(a-d); Ch. 4 - 15(a-b),16(a-b), ECO 305 WK 2 Quiz 1 - Chapters 1 and 2, ECO 305 WK 5 Homework Ch 8 - 6(a-d) , ECO 305 WK 5 Quiz 4 - Chapter 7 , ECO 305 WK 6 Homework Ch 9 - 11(a-c), 12(a-c), ECO 305 WK 6 Quiz 5 - Chapter 8 - All Possible Questions, ECO 305 WK 9 Quiz 8 - Chapters 12 and 13 , ECO 305 WK 11 Quiz 10 - Chapters 16 & 17 , ECO 305 Complete Class Assignments | strayer help, ECO 305 Strayer ECO 305 Week 1, ECO 305 Week 2, ECO 305 Week 3, ECO 305 Week 4, ECO 305 Week 5, ECO 305 week 2 Assignment, ECO 305 week 3Assignment, ECO 305 week 4 Assignment, ECO 305 week 1 Assignment, ECO 305 tutorial, ECO 305 Complete Course, ECO 305 Entire Class, ECO 305 Whole Tutorial, ECO 305 tutorial, ECO 305 Summary, ECO 305 Study Guide, ECO 305 Questions , ECO 305 Answered , ECO 305 Solution, ECO 305 Final , ECO 305 Presentation, ECO 305 Universty, ECO 305 University of, ECO 305 Homework, ECO 305 Version, ECO 305 Strayer assignment, ECO 305 Strayer course, ECO 305...

Words: 252 - Pages: 2

Free Essay

Giancoli Physics 12 Answer Key

...CH 1: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%201%20Physics%20Answer.pdf CH 2: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%202%20Physics%20Answers.pdf CH 3: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%203%20Physics%20Answers.pdf CH 4: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%204%20Physics%20Answers.pdf CH 5: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%205%20Physics%20Answers.pdf CH 6: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%206%20Physics%20Answers.pdf CH 7: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%207%20Physics%20Answers.pdf CH 8: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%208%20Physics%20Answers.pdf CH 9: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%209%20Physics%20Answers.pdf CH 10: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%2010%20Physics%20Answers.pdf CH 11: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%2011%20Physics%20Answers.pdf CH 12: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%2012%20Physics%20Answers.pdf CH 13: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%2013%20Physics%20Answers.pdf CH 14: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%2014%20Physics%20Answers.pdf CH 15: http://dl.dropbox.com/u/2282719/Physics%20Hw%20Answers/Ch%2015%20Physics%20Answers.pdf CH 16:......

Words: 528 - Pages: 3

Premium Essay

Intermediate Accounting 14th Ed. Ch 19 Answers

...reversal. 10. Income statement presentation. 9 8 16, 17, 18, 14, 21, 22 Questions 1, 13 3, 4, 5 6, 7, 13 2, 3, 4, 5, 6, 7, 9 15 10 Brief Exercises Exercises 1 1, 2, 4, 7, 12, 18, 20, 21 4, 5, 6, 7 Concepts Problems for Analysis 1, 2, 3, 8 2, 3, 4 3, 4, 5 2 1, 3, 4, 5, 7, 8, 3, 4, 8, 9 12, 14, 15, 19, 21, 23, 25 7, 11, 16, 18, 19, 20, 21, 22 2, 13, 16, 17, 18, 20, 22 3, 6 1, 2, 6, 7 10, 11, 12 2, 3, 5 1, 6, 7 10 12, 13, 14 11 9, 10, 23, 24, 25 16 8, 17 5 2, 7 2, 7 5, 6 1, 2, 3, 4, 5, 7, 1, 2, 3, 5, 10, 12, 16, 19, 7, 8, 9 23, 24, 25 7 1, 2, 7 11. Conceptual issues—tax allocation. 1, 2, 8, 19, 21, 22 7 12. Valuation allowance—deferred 8, 19 tax asset. 13. Disclosure and other issues. 15 7, 14, 15, 23, 24, 25 Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) 19-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. Identify differences between pretax financial income and taxable income. Describe a temporary difference that results in future taxable amounts. Brief Exercises 1, 2, 5 1, 2, 4, 9, 10 1, 2, 3, 4, 5, 7, 8, 11, 12, 13, 16, 17, 18, 19, 20, 21, 22 4, 5, 7, 8, 11, 12, 14, 15, 17, 18, 19, 20, 21, 22 7, 14, 15, 23, 24, 25 1, 3, 4, 5, 8, 12, 15, 16 4, 6, 7 11 12, 13, 14 3, 15 13, 16, 17, 18, 21, 23, 24, 25 9, 10, 23, 24, 25 8, 11, 16, 19, 20, 21, 22 1, 2, 3, 4, 5, 7, 8, 9 2, 3, 9 5, 7 5 3, 5, 6, 8, 9 1, 3, 4, 6, 7, 8, 9......

Words: 22820 - Pages: 92