Taste Bits Inc

question 10

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 200,000 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 related to the forward contract 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:

Torque Converter

A type of fluid coupling used in automatic transmissions that allows the engine to spin somewhat independently of the transmission, facilitating smooth gear changes.

Flex Disc

Used as a drive intermediary between the engine crankshaft and the torque converter used with automatic transmission systems on trucks; has dampening characteristics. Also known as flexplate.

Vortex Flow

A pattern of fluid motion that rotates around an axis, creating a swirling motion commonly observed in liquids and gases.

Coupling Phase

The stage in connecting two rotating shafts or units where alignment and engagement are optimized for power transmission.