ative contract On January 1, 2015, Nathan Co paid P6,000 cash to acquire a put foreign exchange option for FC37,500 which expires at the end of the year. The option hedges 2015's forecasted sales of FC37,500. Nathan's fiscal year ends every October 31. 1/1/15 P1.45 1.40 Fair value of put option 6,000 5) Determine the intrinsic value at inception of the option contract. c. P 6,000 d. PO Spot rate (market price) Strike price (exercise price) a. P 12,750 b. P 4,125 10/31/15 12/31/15 P1.30 1.40 P1.20 1.40 25,250
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- On January 1,2015, Nathan Co paid 6,000 cash to acquire a put foreign exchange option FC37,500 which expires at the end of the year. The option hedges 2015's forecasted sales of FC37,500.Nathan's fiscal year ends every October 31. 1/1/15 10/31/15 12/31/15Spot rate ( market price) 1.45. 1.20 1.30Strike price (exercise price) 1.40 1.40 1.40Fair value of put action 6,000 25,250 Determine the intrinsic value at inception of the option contract.12,7504,1256,0000At the close of business on December 31, 2021 Tempest Corp pays a $80,000 premium to purchase a foreign currency option giving Tempest the right but not the obligation to purchase 100,000 euros and sell $130,000 US dollars in six months as a hedge of a future euro rental obligation. What is reported on the balance sheet at December 31, 2021 (in US dollars) asset of $0 asset of $80,000 asset of $210,000 liability of $110,000 liability of $130,000On June 1, 2017, Micro Corp. received an order for parts from a Mexican customer at a price of 1,000,000 Mexican pesos with a delivery date of July 31, 2017. On June 1, when the U.S. dollar–Mexican peso spot rate is $0.115, Micro Corp. entered into a two month forward contract to sell 1,000,000 pesos at a forward rate of $0.12 per peso. Micro designates the forward contract as a fair value hedge of the firm commitment to receive pesos, and the fair value of the firm commitment is measured by referring to changes in the peso forward rate. Micro delivers the parts and receives payment on July 31, 2017, when the peso spot rate is $0.118. On June 30, 2017, the Mexican peso spot rate is $0.123, and the forward contract has a fair value of $2,400. What is the net impact on Micro’s net income for the quarter ended June 30, 2017, as a result of this forward contract hedge of a firm commitment?a. $–0–.b. $2,400 increase in net income.c. $4,000 decrease in net income.d. $8,000 increase in net…
- On June 1, 2017, Micro Corp. received an order for parts from a Mexican customer at a price of 1,000,000 Mexican pesos with a delivery date of July 31, 2017. On June 1, when the U.S. dollar–Mexican peso spot rate is $0.115, Micro Corp. entered into a two month forward contract to sell 1,000,000 pesos at a forward rate of $0.12 per peso. Micro designates the forward contract as a fair value hedge of the firm commitment to receive pesos, and the fair value of the firm commitment is measured by referring to changes in the peso forward rate. Micro delivers the parts and receives payment on July 31, 2017, when the peso spot rate is $0.118. On June 30, 2017, the Mexican peso spot rate is $0.123, and the forward contract has a fair value of $2,400.What is the net impact on Micro’s net income for the quarter ended September 30, 2017, as a result of this forward contract hedge of a firm commitment? Choose the correct.a. $–0–.b. $115,000 increase in net income.c. $118,000 increase in net…On June 1, 2017, Micro Corp. received an order for parts from a Mexican customer at a price of 1,000,000 Mexican pesos with a delivery date of July 31, 2017. On June 1, when the U.S. dollar–Mexican peso spot rate is $0.115, Micro Corp. entered into a two month forward contract to sell 1,000,000 pesos at a forward rate of $0.12 per peso. Micro designates the forward contract as a fair value hedge of the firm commitment to receive pesos, and the fair value of the firm commitment is measured by referring to changes in the peso forward rate. Micro delivers the parts and receives payment on July 31, 2017, when the peso spot rate is $0.118. On June 30, 2017, the Mexican peso spot rate is $0.123, and the forward contract has a fair value of $2,400.What is Micro’s net increase or decrease in cash flow from having entered into this forward contract hedge? Choose the correct.a. $–0–.b. $1,000 increase in cash flow.c. $1,500 decrease in cash flow.d. $2,000 increase in cash flow.On May 1, 2019, LAG Co. purchased a short-term P2,000,000 face value, 9% debt instruments for P1,860,000 including the accrued interest and classified it as a trading security. The debt instruments mature on January 1, 2022, and pay interest semi-annually on January 1 and July 1. On December 31, 2019, the fair market value of the instruments is 98%. On March 2, 2020, LAG Co. sold the trading security for P1,980,000. 31. How much will be recognized as gain (loss) on sale of trading security on 2020 income statement? a. (P10,000) b. P20,000 c. P120,000 d. P150,000
- Q4 An analyst holds a set of forward contracts on euro, against usd (=hc). Compute the fair value of the contracts.(a) Purchased: eur 1m 60 days (remaining). Historic rate: 1.350; current rate for same date: 1.500; risk-free rates (simple per annum): 3% in usd, 4% in euro. (b) Purchased: eur 2.5m 75 days (remaining). Historic rate: 1.300; current spot rate: 1.5025; risk-free rates (simple per annum): 3% in usd, 4% in euro. (c) Sold: eur 0.75m 180 days (remaining). Historic rate: 1.400; current rate for same date: 1.495; risk-free rates (simple per annum): 3% in usd, 4% in euro.On May 1, 2020, GAL Co. purchased a short-term P2,000,000 face value, 9% debt instruments for P1,860,000 including the accrued interest and classified it as a trading security. The debt instruments mature on January 1, 2023, and pay interest semi-annually on January 1 and July 1. On December 31, 2020, the fair market value of the instruments is 98%. On March 2, 2021, GAL Co. sold the trading security for P1,980,000. How much will be recognized as income on the 2020 income statement? a. P100,000 b. P120,000 c. P160,000 d. P280,000 e. answer not givenOn January 1, GEN enters into a contract with LORD for the sale of a high-end security scanner for P630,000. The contract includes a put option the obliges GEN to repurchase the scanner machine from LORD for P567,000 on or before December 31. The market value is expected to be P495,000 on December 31. LORD pays GEN P630,000 on January 1. The transaction should be accounted for as a:A. Sale C. No sale/leaseB. Lease D. Cannot be determined PLEASE SHOW HOW THE ANSWER WAS FORMULATED WITH COMPLETE SOLUTION IN GOOD ACCOUNTING FORM.
- Zoro Company enters into a contract to sell Product A and Product B on July 1, 2020 for an upfront cash payment of P250,000. Product A will be delivered at the end of the year, and Product B will be delivered the following year. Zoro Company sells Product A for P80,000 and Product B for P240,000. 1. How many performance obligations are there in the contract? 2.what is the transaction price? 3.how much is revenue to be recognized in 2020? 4. how much is revenue to be recognized in 2021?. On December 31, 2020, SSNIT and SIC (non-life) entered into a six year swap arrangement with first payment to be exchanged on December 31st, 2022 and each December 31st thereafter under the following terms: SIC will pay SSNIT an amount equals to 5% per annum on a notional principal of US$50 million. (FIXED Amount) SSNIT will pay SIC an amount equals to one-year LIBOR +1.25% per annum on a notional amount of US$50 million. (Flexible Amount). On 31stDecember 2022, one-year LIBOR is projected to be 2.75%. What will be the payment flows for the first year, December 31st?ABC Company Ltd purchased 5000 cocoa futures contract at a price of $150per contract. As part of the contract, ABC was required to deposit $10 percontract initially in their account with the maintenance margin set at $5 percontract. If the price per contract falls to $142 overnight, what action will theexchange require ABC to undertake?
