Instructions: Prepare the journal entries required on the dates listed: 1. Assuming that on 3/20/2021 the option was exercised, and the inventory delivered and paid. 2. Assuming that the spot rate on 3/20/2021 is $0.76?
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- On Sept 1, 2020, 2B Co. anticipated the purchase of merchandise from a foreign vendor at a price of $1,000. The purchase would probably occur on Jan 30,2021. On Oct 1,2020, 2B Co. forecasted the sale of merchandise to a foreign customer at a price of $3,000. The sale would probably occur on Mar 31, 2021. On Sept 1, 2020, 2B Co. purchased a 150-day call option to buy $1,000 at an option price of P20 by paying option premium of P200. On Oct 1, 2020, 2B Co. purchased a 180-day put option to sell $3,000 at a strike price of P24 by paying option premium of P300. The company prepares calendar year financial statements. The forecasted purchase and sales transaction occurred on the date anticipated. For the year ended Dec 31, 2021, all foreign currency receivables are collected but only 80% of purchased inventories from the foreign vendor were sold to third person. The following additional data are provided: 9/1/2020 10/1/2020 12/31/2020 1/30/2021 3/31/2021 Buying spot rate P23 P24 P21…46. During 2021, Tartarus Company signed a noncancellable contract to purchase 500 sacks of rice at P900 per sack with delivery to be made in 2022. On December 31, 2021, the price of rice had fallen to P850 per sack. On May 9, 2022, Tartarus Company accepts delivery of rice when the price is P880 per sack. In December 31, 2021 income statement, what amount of loss on purchase commitment should be recognized?Problem 8 On November 23, 2019, Guava Company entered intoa non-cancellable commitment to purchase 120,000 barrels of aviation fuel for P35 per barrel on March 14, 2020. By December 31, 2019 the purchase price had fallen to P25 per barrel. However, by March 14, 2020, when the entity took delivery of the 120,000 barrels the price had risen to P40 per barrel. How much is the recovery of loss on purchase commitment on March 14, 2020?
- 2021 2020 Commercial obligations 1300 1400 Write-offs of inventories for the financial year due to destruction 400 0 Fee stocks(after write-off) 900 1100 Cost of sales (including inventory write-off) 18000 16000 Based on the above, the traffic speed index of suppliers (times) of the year 2021 shows the actual payments to suppliers and which is comparable to the corresponding index of 2020. How much is it?56 In August 2021, Commonlo Corp. commits to selling 100 of its merchandise to M&H Co. for P30,000 (P300 per product). The merchandise is to be delivered to M&H over the next 6 months. After 60 merchandises were delivered, the contract is modified and Commonlo promises to deliver 80 more products for an additional P21,600 (P270 per station). At year-end, Commonlo delivered an additional 90 products. All sales are cash on delivery. Assume that the additional term is a prospective modification to the original contract. How much revenue will be recognized on the contract for the year 2021?On October 6, 2021, the Elgin Corporation signed a purchase commitment to purchase inventory for $60,000 on or before March 31, 2022. The company’s fiscal year-end is December 31. The contract was exercised on March 21, 2022, and the inventory was purchased for cash at the contract price. On the purchase date of March 21, the market price of the inventory was $54,000. The market price of the inventory on December 31, 2021, was $56,000. The company uses a perpetual inventory system.Required:1. Prepare the necessary adjusting journal entry (if any is required) on December 31, 2021.2. Prepare the journal entry to record the purchase on March 21, 2022.
- Based on past experience, Leickner Company expects to purchase raw materials from a foreign supplier at a cost of 1,000,000 marks on March 15, 2018. To hedge this forecasted transaction, the company acquires a three-month call option to purchase 1,000,000 marks on December 15, 2017. Leickner selects a strike price of $0.58 per mark, paying a premium of $0.005 per unit, when the spot rate is $0.58. The spot rate increases to $0.584 at December 31, 2017, causing the fair value of the option to increase to $8,000. By March 15, 2018, when the raw materials are purchased, the spot rate has climbed to $0.59, resulting in a fair value for the option of $10,000.a. Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials, assuming that December 31 is Leickner’s year-end and that the raw materials are included in the cost of goods sold in 2018.b. What is the overall impact on net income over the two accounting periods?c. What is the net…On September 5, 2024, Howard Corporation signed a purchase commitment to purchase inventory for $137, 000 on or before March 31, 2025. The company's fiscal year-end is December 31. The contract was exercised on March 4, 2025, and the inventory was purchased for cash at the contract price. On the purchase date of March 4, 2025, the market price of the inventory was $121, 600. The market price of the inventory on December 31, 2024, was 5126,300. The company uses a perpetual inventory system. Required: Prepare the necessary adjusting journal entry (if any is required) on December 31, 2024. Prepare the journal to record the purchase on March 4, 2025.8. On October 1, 2021, Loving Company approved a formal plan to sell a business segment. The sale will occur on April 1, 2022. The segment’s revenue and expenses for 2021 were P30,000,000 and P32,000,000, respectively. On December 31, 2021, the carrying amount of the assets of the segment was P10,000,000 and the fair value less costs of disposal was P9,600,000. The income tax rate is 25%. What amount should be reported as income/(loss) from discontinued operation for 2021? A. (2,400,000) B. (2,000,000) C. (1,800,000) D. 0 E. None of them
- 51.On November 17, 2020, GGG Airways entered in to a commitment to purchase 3,000 barrels of aviation fuel for P9,000,000 on March 23, 2021. GGG entered into this purchase commitment to protect itself against the volatility in the aviation fuel market. By December 31, 2020, the purchase price of aviation fuel had fallen to P2,200 per barrel. However, by March 23, 2021, when GGG took delivery of the 3,000 barrels, the price of aviation fuel had risen to P2,500 per barrel. How much should be recognized as loss on purchase commitment on December 31, 2020?On October 15, 2020, Oil Products Co. purchased 4,000 barrels of fuel oil with a cost of $240,000 ($60 per barrel). Oil Products is holding this inventory in anticipation of the winter 2021 heating season. Oil Products accounts for its inventory at the lower-of-FIFO-cost-or-net realizable value. To hedge against potential declines in the value of the inventory, Oil Products also purchased a put option on the fuel oil. Oil Products paid an option premium of $300 for the put option, which gives Oil Products the option to sell 4,000 barrels of fuel oil at a strike price of $60 per gallon. The option expires on March 1, 2021. The following data are available with respect to the values of the fuel of inventory and the put option. Date Market Price of Fuel Oil Time Value of Put Option October 31, 2020 $58 per gallon $175 November 30, 2020 57 per gallon 105 December 31, 2020 54 per gallon 40 Instructions a. Prepare the journal entries of Oil Products for the…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.12,7504,1256,0000