On January 1^st,2014 ABC Inc

question 71

Multiple Choice

On January 1^st,2014 ABC Inc.had invoiced a client in New York for $10,000 US for services rendered that day.ABC did not hedge this receivable.The receivable is due in 60 days.On January 1^st,2014,the spot rate was $1US = $1.02CDN.On January 31^st,2014,the spot rate was $1US = $1.05CDN.What is the effect of the above information on ABC's January financial statements?

• A) A $300 foreign exchange gain.
• B) A $300 foreign exchange loss.
• C) A $300 credit to OCI.
• D) A $300 debit to OCI.

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Definitions:

Junk Bonds

High-risk and high-yield bonds rated below investment grade by credit rating agencies.

Subordinated Debt

A class of debt which ranks below other debts with regard to claims on assets or earnings.

Priority of Repayment

A hierarchy or order in which obligations and debts are to be paid, particularly relevant in bankruptcies and when liquidating assets.

Bond Indenture

A legal document specifying the terms and conditions under which a bond is issued.