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    Direct foreign exchange rates in U.S. dollars

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    I need help completing the following exercises. I am going crazy looking for examples, etc. Please help me. Attached are the exercises. Thank you.

    Exercises:

    1. On January 1, 20X9, Long Corporation purchased 60 percent of Shortway Company's common
    stock and recorded the following entry:

    Investment in Shortway Co. Stock 327,000

    Cash 327,000

    The book values and fair values of the balance sheet items reported by Shortway at January 1, 20X9, are as follows:

    2. Verry Corporation owns 75 percent of Spawn Corporation's voting common stock. Verry
    reported income from its separate operations of $90,000 and $110,000 in 20X4 and
    20X5, respectively. Spawn reported net income of $60,000 and $40,000 in 20X4 & 20X5,
    respectively.

    Required:

    a. Compute consolidated net income for 20X4 and 20X5 if Verry sold land with a book value of $95,000 to Spawn for $120,000 on June 30, 20X4.

    b. Compute consolidated net income for 20X4 and 20X5 if Spawn sold land with a book
    value of $95,000 to Verry for $120,000 on June 30, 20X4.

    3. Suppose the direct foreign exchange rates in U.S. dollars are:

    1 British pound = $1.60
    1 Canadian dollar = $.74

    Required:

    a. What are the indirect exchange rates for the British pound and the Canadian dollar?
    b. How many pounds must a British company pay to purchase goods costing $8,000 from a U.S. company?
    c. How many U.S. dollars must be paid for a purchase costing 4,000 Canadian dollars?

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    ANSWERS
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    PROBLEM

    Exercises:

    1. On January 1, 20X9, Long Corporation purchased 60 percent of Shortway Company's common
    stock and recorded the following entry:

    Investment in Shortway Co. Stock 327,000

    Cash 327,000

    The book values and fair values of the balance ...

    Solution Summary

    The direct foreign exchange rates in the United States dollars are examined.

    $2.49

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