1. Classify the following transactions for the U.S. balance of payments (with a credit and debit each)...
Question:
1. Classify the following transactions for the U.S. balance of payments (with a credit and debit each)
Credit | Debit | |
Current Account | ||
Merchandise | outgoing | incoming |
Services | provided by domestic country | provided to domestic country |
Investment income | earned | paid |
Unilateral transfer | incoming | outgoing |
Capital account | ||
Claims | owed by domestic country | owed to domestic country |
Domestic assets abroad | decrease | increase |
Foreign assets at home | increase | decrease |
a) Suppose that a firm in the U.S. ships merchandise to an overseas buyer with the understanding that the price of $50 million is to be paid within 90 days.
b) Assume U.S. residents import merchandise valued at $65 million, making payment by transferring $10 million from balances that they hold in foreign banks and $55 million from balances held in U.S. banks.
c) Residents of the U.S. send gifts worth $1 million to their relatives abroad.
d) U.S. residents purchased $40 million in long-term bonds issued by foreign borrowers.
e) U.S. firms provide $10,000 of shipping services to foreign firms who pay for these services from accounts held in the U.S.
f) A U.S. firm pays dividend checks worth $1 million to foreign residents (several countries), all of whom deposit these checks in local banks.
Integrated Accounting
ISBN: 978-1285462721
8th edition
Authors: Dale A. Klooster, Warren Allen, Glenn Owen