On April 1, Quality Corporation, a U

question 49

Multiple Choice

On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.41 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.36. At the end of three months, the spot rate is $1.37 per euro, and Quality delivers the merchandise, collecting 400,000 euros. What are the effects on net income from these transactions?

• A) $16,000 Discount Expense plus a $12,000 positive Adjustment to Net Income when the merchandise is delivered.
• B) $16,000 Discount Expense plus a $12,000 negative Adjustment to Net Income when the merchandise is delivered.
• C) $16,000 Discount Expense plus a $20,000 negative Adjustment to Net Income when the merchandise is delivered.
• D) $16,000 Discount Expense plus a $20,000 positive Adjustment to Net Income when the merchandise is delivered.
• E) $16,000 Discount Expense plus an $16,000 positive Adjustment to Net Income when the merchandise is delivered.

---

Definitions:

Individualism Or Collectivism

A cultural element that describes whether a society values personal goals and independence (individualism) or prioritizes group goals and cohesion (collectivism).

Perception Process

Involves the organization, identification, and interpretation of sensory information to understand the environment and events.

Internal or External Stimulus

Any event or situation that triggers a response or reaction from an individual or organization, which can originate from within (internal) or outside (external) the entity.

Personality

The set of distinctive characteristics that lead an individual to respond in a consistent way to certain situations.