a. How much is the Foreign Currency Payable on March 1, 2017 priorto settlement? b. How much is the Net ForEx gain or (loss)?
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a. How much is the Foreign Currency Payable on March 1, 2017 priorto settlement?
b. How much is the Net ForEx gain or (loss)?
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- On December 1, 2020, Venice Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,410,000 pesos on March 1, 2021. The following U.S. dollar per peso exchange rates apply: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 0.026 $ 0.029 December 31, 2020 0.028 0.031 March 1, 2021 0.032 N/A Ignoring present values, Which of the following correctly describes the manner in which Venice Company will report the forward contract on its December 31, 2020, balance sheet? As an asset in the amount of $1,410 As a liability in the amount of $1,410 As an asset in the amount of $2,820 As a liability in the amount of $2,820Arbie Corporation, a Philippine importer, purchased merchandise from T Company of Thailand for 300,000 baht on March 1, 2016, when the spot rate for a baht was P1.63. The accounts payable denominated in baht was not due until May 30, 2016, so Arbie Company immediately entered into a 90-day forward contract to hedge the transaction against exchange rate changes. The contract was made at a forward exchange rate of P1.65 per baht. Arbie settled the forward contract and the accounts payable on May 30, 2016 when the spot rate for a baht is P1.60. On the settlement of the forward contract on May 30, 2016, Arbie should record a forex gain loss of:On December 12, year 11, Imp Co. entered into three forward exchange contracts, each to purchase 100,000 LCU's in 90 days. The relevant exchange rates are as follows:Spot rate Forward rate(for March 12, year 12)December 12, year 11 $0.88 $0.90December 31, year 11 $0.98 $0.93Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp specifications. At December 31, 2022, what amount of foreign currency transaction gain should Imp include in income from this forward contract?a. $0b. $3,000c. $5,000d. $10,000
- Assume that Gilligan Ltd enters into a contract to buy inventory from an overseas supplier. On1 February 2023 it acquires the material at a cost of US$500,000 payable in two months’ time.The exchange rate at the time is A$1 = US$1.15. The actual debt is considered to be a tradepayable and is a primary financial instrument. The exchange rate on 1 April 2023 is A$1 =US$1.09.Required:(a) As the debt is payable in two months’ time describe the potential risk to Gilligan Ltd.(b) Assume that McCoy Ltd is concerned about possible adverse exchange ratemovements, what action could the company take?On December 20, 2017, Butanta Company (a U.S. company headquartered in Miami, Florida) sold parts to a foreign customer at a price of 50,000 ostras. Payment is received on January 10, 2018. Currency exchange rates for 1 ostra are as follows: December 20, 2017 $1.05December 31, 2017 1.02January 10, 2018 0.98a. How does the fluctuation in exchange rates affect Butanta’s 2017 income statement?b. How does the fluctuation in exchange rates affect Butanta’s 2018 income statement?Carl Inc. purchased inventory on September 12, 2017 from a foreign customer for 750,000 units of foreign currency (FC) due on January 12, 2018. Simultaneously, the company entered into a forward contract for 750,000 units of FC for delivery on January 12, 2018 at the forward rate of $1.03. Payment was made to the foreign customer on January 12, 2018. The company ends its fiscal year on December 31. The following exchange rates were quoted: Forward Rate Date Spot Rate (Delivery on 1/12/2018) 9/12/2017 1.01 1.03 12/31/2017 1.08 1.09 1/12/2018 1.05 Notes: Read carefully and follow strictly so that Bb can grade you correctly!1. Use comma in numbers, one thousand is 1,000, not 1000. Round to the nearest dollar: 1,000.45 should be 1,000, and 1,000.55 should be 1,001, no decimal points. No $ sign.2. If no entry is required, write N/A.3. Only use the following accounts: Inventory, A/P (FC), A/R (FC), Cash, Sales, CGS, Exchange G/L, Fwd Contract,…
- On May 8, 2019, Jett Company (a U.S. company) made a credit sale to Lopez (a Mexican company). The terms of the sale required Lopez to pay 800,000 pesos on February 10, 2020. Jett prepares quarterly financial statements on March 31, June 30, September 30, and December 31. The exchange rates for pesos during the time the receivable is outstanding follow. Compute the foreign exchange gain or loss that Jett should report on each of its quarterly income statements for the last three quarters of 2019 and the first quarter of 2020. Also compute the amount reported on Jett’s balance sheets at the end of each of its last three quarters of 2019. May 8, 2019 . $0.1323 June 30, 2019 . 0.1352 September 30, 2019 . 0.1368 December 31, 2019 0.1335 February 10, 2020 . 0.1386On December 1, 20X8, Denizen Corporation entered into a 120-day forward contract to purchase 200,000 Canadian dollars (C$). Denizen's fiscal year ends on December 31. The forward contract was to hedge a firm commitment agreement made on December 1, 20X8, to purchase electronic goods on January 30, with payment due on March 31, 20X8. The derivative is designated as a fair value hedge. The direct exchange rates follow: Spot Rate Forward Rate for March 1, 20X9 December 1, 20X8 $ 0.940 $ 0.944 December 31, 20X8 $ 0.945 $ 0.947 January 30, 20X9 $ 0.942 $ 0.943 March 31, 20X9 $ 0.941 Required: Prepare all journal entries for Denizen Corporation.On 1 November 2022, Long Ltd enters a contract to buy inventory from an overseas supplier, with the inventory to be delivered in six months' time. A sum of US$1 000000 is payable on delivery of the inventory. Long Ltd does not want to be exposed to potential losses associated with changes in the exchange rate. As a result, Long Ltd takes out a forward rate contract with Board Bank to purchase US$1 000000 in six months' time at an exchange rate of A$1.00 = US$0.70. REQUIRED Explain who now bears the risks associated with changes in the exchange rate, and calculate how much Long Ltd will ultimately pay for the invento
- On September 30, 2017, Ericson Company negotiated a two-year, 1,000,000 dudek loan from a foreign bank at an interest rate of 2 percent per year. It makes interest payments annually on September 30 and will repay the principal on September 30, 2019. Ericson prepares U.S.-dollar financial statements and has a December 31 year-end.a. Prepare all journal entries related to this foreign currency borrowing assuming the following exchange rates for 1 dudek:b. Taking the exchange rate effect on the cost of borrowing into consideration, determine the effective interest rate in dollars on the loan in each of the three years 2017, 2018, and 2019.On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 100,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 100,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply: Date Spot rate Forward rate (to April 30, 2018) November 1, 2017 $0.21 $0.20 December 31, 2017 0.19 0.17 April 30, 2018 0.18 N/A Bernard’s incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.a. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.b. What is the impact on net income in 2017?c. What is the impact on net income in 2018?On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,000,000 pesos and will receive payment in three months on September 1. On June 1, Alexander acquired an option to sell 1,000,000 pesos in three months at a strike price of $0.062. Relevant exchange rates and option premiums for the peso are as follows:Alexander must close its books and prepare its second-quarter financial statements on June 30.a. Assuming that Alexander designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars. What is the impact on net income over the two accounting periods?b. Assuming that Alexander designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars. What is the impact on net income over the two accounting periods?
