Taste Bits Inc

question 12

Multiple Choice

Taste Bits Inc. purchased chocolates from Switzerland for 200,000 Swiss francs (SFr) on December 1, 20X8. Payment is due on January 30, 20X9. On December 1, 20X8, the company also entered into a 60-day forward contract to purchase 100,000 Swiss francs. The forward contract is not designated as a hedge. The rates were as follows:

-Based on the preceding information,the entries on December 31,20X8,include a:

• A) Credit to Foreign Currency Payable to Exchange Broker, $4,000.
• B) Debit to Foreign Currency Receivable from Exchange Broker, $6,000.
• C) Debit to Foreign Currency Receivable from Exchange Broker, $186,000.
• D) Debit to Foreign Currency Transaction Gain, $4,000.

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Definitions:

Standard Costs

Predetermined costs for manufacturing a product or delivering a service, used as targets or benchmarks.

Variances

The differences between planned, budgeted, or standard costs and actual costs.

Widgets

A generic term often used to refer to any product or manufactured item for examples or hypothetical situations.

Fixed Factory Overhead

The regular, consistent costs associated with operating a factory that do not vary with production volume, such as rent, salaries, and utilities.