The following table summarizes thefacts of five independent cases ( labeled A th
ID: 2433441 • Letter: T
Question
The following table summarizes thefacts of five independent cases ( labeled A through E) of UScompanies engaging in credit transactions with foreign corporationswhile the foreign exchange rate is fluctuating:
COLUMN
Case 1 2 3 4
A Sales Foreigncurrency Falling ________
B Purchases USdollars Rising _________
C _________ Foreigncurrency Rising Loss
D Sales ____________ Falling no effect
E Purchases Foreign currency _______ gain
Column 1 indicates the type ofcredit transaction in which the US company engaged with the foreigncorporations. The answer in this column is either Sales orPurchases
Column 2 indicates the currency inwhich the invoice price is stated. The answer is either US dollarsor Foreign currency.
Column 3 indicates the directionin which the foreign currency exchange rate has moved between thedate of the credit transaction and the date of settlement. Theanswer in this column is either Rising or Falling
Column 4 indicates the effect ofthe exchange rate fluctuation on the income of the Amerciancompany. The answer is either Gain, Loss, or NoEffect.
Fill in theblanks.
Explanation / Answer
Case
Type of Credit Transaction
Currency Used in Contract
Exchange Rate Direction
Effect on Income
A
Sales
Foreign currency
Falling
Loss
B
Purchases
U.S.dollars
Rising
Noeffect
C
Purchases
Foreign currency
Rising
Loss
D
Sales
U.S.dollars
Falling
No effect
E
Purchases
Foreign currency
Falling
Gain
Case
Type of Credit Transaction
Currency Used in Contract
Exchange Rate Direction
Effect on Income
A
Sales
Foreign currency
Falling
Loss
B
Purchases
U.S.dollars
Rising
Noeffect
C
Purchases
Foreign currency
Rising
Loss
D
Sales
U.S.dollars
Falling
No effect
E
Purchases
Foreign currency
Falling
Gain
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