Answer:
A. debit to Patent for 10,000FC multiplied by the current exchange rate.
Explanation:
Since the excess of cost over book value was 10,000FC and this excess was traceable to a 10-year patent.
The elimination entry to amortize the excess will include a debit to Patent for 10,000FC multiplied by the current exchange rate assuming the foreign entity's local currency is its functional currency.
Answer:
Pure competition
Explanation:
Pure competition refers to an ideal market with very many suppliers selling an identical product. Because the sellers are many, none of them can influence the price. Pure competition is also the perfect competition. Other characteristics of perfect competition include.
- easy to enter and exit the market since there are no trade barriers
- All sellers sell a homogeneous product
- all sellers are price takers
- There are many buyers.
- Buyers have sufficient knowledge of prices and suppliers.
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Answer:
The interest rate is higher in the US.
Explanation:
The forward price is calculated using the following formula,
F= S ( 1+Rd / 1+Rf)^t
where,
- F = Forward rate
- S = Spot rate
- Rd = Nominal interest rate in domestic market
- Rf = Nominal interest rate in foreign market
- t = time in years
We consider that the domestic market is the US and the domestic currency is the USD. Thus, it is a direct quote where 1 EUR = 1.3 USD
The forward price ER is more than the Sport ER only when the interest rate in domestic market is more than the interest rate in foreign market and as a result, the value of domestic currency against a foreign currency in the forward market depreciates.
We can see this by the following example,
Say Spot rate is $1.3 per 1 EUR and the interest rate in US is 10% while that in Euro zone is 5%. When we calculate the forward ER we will see that 1 EUR will buy us more USD in forward (more than 1.3 USD)
F= 1.3 * (1.1 / 1.05)^1 => $1.362 PER 1EUR
