Stock, Foreign Currency, Exchange Rates
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6.Which one of the following characteristics of preferred stock would make the stock resemble a liability?
A)The preferred stock is callable.
B)The preferred stock is convertible.
C)The preferred stock has warrants attached.
D)The preferred stock is noncumulative.
E)The preferred stock is participating.
7.On January 1, 2003, Riley Corp. acquired some of the outstanding bonds of one of its subsidiaries. The bonds had a carrying value of $421,620, and Riley paid $401,937 for them. How should you account for the difference between the carrying value and the purchase price in the consolidated financial statements for 2003?
A)The difference is added to the carrying value of the debt.
B)The difference is deducted from the carrying value of the debt.
C)The difference is treated as a loss from the extinguishment of the debt.
D)The difference is treated as a gain from the extinguishment of the debt.
E)The difference does not influence the consolidated financial statements.
8.Which statement is true regarding a foreign currency option?
A)A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future.
B)A foreign currency option gives the holder the obligation only sell foreign currency in the future.
C)A foreign currency option gives the holder the obligation to only buy foreign currency in the future.
D)A foreign currency option gives the holder the right but not the obligation to buy or sell foreign currency in the future.
E)A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future at the spot rate.
9.A U.S. company sells merchandise to a foreign company denominated in the foreign currency. Which of the following statements is true?
A)If the foreign currency appreciates, a foreign exchange gain will result.
B)If the foreign currency depreciates, a foreign exchange gain will result.
C)No foreign exchange gain or loss will result.
D)If the foreign currency appreciates, a foreign exchange loss will result.
E)Any gain or loss will be included in comprehensive income.
10.Which accounts are remeasured using current exchange rates?
A)all revenues and expenses
B)all assets and liabilities
C)all monetary assets and liabilities
D)all current assets and liabilities
E)all noncurrent assets and liabilities
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This solution identifies the correct answer to concepts of stock, foreign currency, exchange rates and justifies why.
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6. A)The preferred stock is callable.
This would put a 'maturity' to the preferred stock.
7. D)The difference is treated as a gain from the extinguishment of the debt.
Extraordinary gain from ...
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