Taste Bits Inc

question 9

Multiple Choice

Taste Bits Inc.purchased chocolates from Switzerland for 200,000 Swiss francs (SFr) on December 1,2008.Payment is due on January 30,2009.On December 1,2008,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 31,2008,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:

Magma Chambers

Large pools of molten rock located beneath the Earth's surface, serving as the source for volcanic eruptions.

Volcanic Domes

Rounded, bulbous formations created by the slow extrusion of very viscous lava from a volcano, which hardens close to the vent.

Gas Pressure

The force exerted by gas molecules colliding with the surfaces of objects in a container, influenced by the temperature and volume of the gas.

Shield Volcano

A broad, domed volcano with gently sloping sides, built by the eruption of fluid, basaltic lava.