Lion Corporation, a U $$\begin{array} { l c c } & \text { Spot } & \text { Forward } \\\hline 6 / 1 & \$ 0.53 & \$ 0.60 \\6 / 30 & \$ 0.54 & \$ 0.58\end{array}$$

question 7

Essay

Lion Corporation, a U.S.firm, entered into several foreign currency transactions during the year.Determine the effect of each transaction on net income for that current accounting year only.Lion has a June 30 year end.
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Required:
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a.On January 15, Lion sold $30,000 (Canadian) in merchandise to a Canadian firm, to be paid for on February 15 in Canadian dollars.Canadian dollars were worth $0.85 (U.S.) on January 15 and $0.82 (U.S.) on February 15.?
b.On June 1, Lion purchased and received a computer costing 100,000 euros from a German firm.Lion paid for the computer on August 1.On June 1, to reduce exchange risks, Lion purchased a contract to buy 100,000 marks in 60 days.Exchange rates are as follows:
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$$\begin{array} { l c c } & \text { Spot } & \text { Forward } \\\hline 6 / 1 & \$ 0.53 & \$ 0.60 \\6 / 30 & \$ 0.54 & \$ 0.58\end{array}$$ Discount rate = 6%
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c.On June 1, Lion sold merchandise to a customer for 100,000 FC and purchased an option to sell 100,000 FC in 60 days to hedge the receivable.The option sold for a premium of $6,500 and a strike price of $1.20.The value of the option 6/30 was $12,500.The spot rate on June 1 was $1.19 and $1.25 on June 30.

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Definitions:

Cultural Difference

Variations in the customs, beliefs, practices, and social behavior between different societies or groups, often leading to diverse worldviews and ways of life.

Internal Attribution

The process of assigning the cause of behavior to internal characteristics, such as personality or disposition.

Self-Enhancement

The desire to maintain and increase the positivity of the self-concept.

Unrealistically Positive Views

An excessively optimistic outlook or perception of oneself or situations, often ignoring realistic or negative aspects.