Trente Switch and Signal Sold Equipment to a Canadian Transportation

question 49

Multiple Choice

Trente Switch and Signal sold equipment to a Canadian transportation company at a price of 300,000 Canadian dollars with payment due in 60 days.On the date of sale,the exchange rate was 1.50 Canadian dollars per U.S.dollar.Trente decided to hedge the risk of currency fluctuations by purchasing 300,000 Canadian dollars with payment due in 60 days.If the exchange rate in 60 days is 1.25 Canadian dollars per U.S.dollar,Trente Switch and Signal will:

• A)Recognize a net gain of $40,000 on the two transactions.
• B)Recognize a $40,000 gain when it collects the receivable and incur a $40,000 loss when it pays the liability.
• C)Incur a $40,000 loss when it collects the receivable and recognize a $40,000 gain when it pays the liability.
• D)Incur a net loss of $40,000 on the two transactions.

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Definitions:

Self-induced Vomiting

is an unhealthy behavior often linked to eating disorders, where an individual purposely vomits to prevent weight gain or relieve discomfort.

Bulimia Nervosa

A condition in which a person develops a cycle of “bingeing,” or overeating enormous amounts of food at one sitting, and then using unhealthy methods to avoid weight gain.

Severe Depression

A psychological ailment manifested by an enduringly low mood or disinterest in hobbies, substantially interfering with normal life.

Major Depressive Disorder

A mental disorder characterized by persistent sadness, lack of interest in activities, and additional physical and cognitive symptoms, affecting daily functioning.