On April 1, Quality Corporation, a U

question 55

Multiple Choice

On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.41 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.36. At the end of three months, the spot rate is $1.37 per euro, and Quality delivers the merchandise, collecting 400,000 euros. What are the effects on net income from these transactions?

• A) $20,000 Discount Expense plus a $12,000 positive Adjustment to Net Income when the merchandise is delivered.
• B) $20,000 Discount Expense plus a $12,000 negative Adjustment to Net Income when the merchandise is delivered.
• C) $20,000 Discount Expense plus a $20,000 negative Adjustment to Net Income when the merchandise is delivered.
• D) $20,000 Discount Expense plus a $16,000 positive Adjustment to Net Income when the merchandise is delivered.
• E) $20,000 Discount Expense plus a $20,000 positive Adjustment to Net Income when the merchandise is delivered.

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Definitions:

Outsourcing

The practice of hiring external firms or individuals to perform tasks, handle operations or provide services that are either difficult to manage or are outside the company's core competencies.

Employee Morale Risks

Potential threats to the emotional well-being and satisfaction of employees, which can adversely affect productivity and organizational performance.

Service Risks

Refers to the potential for losses or negative outcomes that a business may experience when delivering services to customers.

HR Activities

Tasks and functions carried out by the Human Resources department, including recruiting, training, employee relations, and benefits management.