Taste Bits Inc

question 8

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 January 30,20X9 related to the forward contract include a:

• A)Debit to Dollars Payable to Exchange Broker,$184,000.
• B)Credit to Foreign Currency Transaction Gain,$4,000.
• C)Credit to Foreign Currency Receivable from Exchange Broker,$180,000.
• D)Debit to Foreign Currency Units (SFr),$184,000.

---

Definitions:

Internal Rate

Commonly identified as the internal rate of return (IRR), this is the discount rate that sets the net present value (NPV) of all cash flows associated with a specific project to zero.

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for time value of money.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity.

Cash Outflow

Payments or expenditures made by a business or an individual, leading to a decrease in cash assets.