Compared to a Situation in Which There Is No Change

question 221

Multiple Choice

Compared to a situation in which there is no change in the value of the Canadian dollar relative to the peso, in which of the following situations would you be worse off?

• A)You borrow 10,000 pesos, you earn income in Canadian dollars, the Canadian dollar appreciates against the peso, and you must pay back the loan in pesos.
• B)You borrow $10,000, you earn income in pesos, the Canadian dollar depreciates against the peso, and you must pay back the loan in Canadian dollars.
• C)You borrow $10,000, you earn income in pesos, the Canadian dollar appreciates against the peso, and you must pay back the loan in Canadian dollars.
• D)You borrow 10,000 pesos, you earn income in pesos, the Canadian dollar depreciates against the peso, and you must pay back the loan in pesos.
• E)You borrow 10,000 pesos, you earn income in dollars, the Canadian dollar depreciates against the pesos, and you must pay back the loan in dollars.

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Definitions:

General Journal

A primary accounting record used for recording all types of transactions and events, ensuring every financial activity is documented.

Special Journal

A financial journal designed for recording a specific type of transaction in a more efficient manner.

Accrual Basis

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when the cash transaction occurs.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid out, regardless of when the transactions occurred.