n November 1, 2020, Americo, Corporati ue for 120 days. Thus, the transaction w orporation also entered a 120-day forwar edge. The direct exchange rates were as
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- On November 1, 2021, Americo, Corporation purchased wine on credit from Venezia Company for €800,000. Payment is not due for 120 days. Thus, the transaction will be settled on February 28, 2022. On November 1, 2021, Americo, Corporation also entered a 120-day forward contract to purchase €800,000. The forward contract is not designated as a hedge. The direct exchange rates were as follows: SPOT FORWARD11/1/2021 $ 1.09 $ 1.06 (120 days) 12/31/2021 $ 1.05 $ 1.11 (60 days) 2/28/2022 $ 1.12 JOURNAL ENTRIES ON NOVEMBER 1, 2021 (TRANSACTION DATE): Foreign Currency Transaction YEAR-END OF DECEMBER 31, 2021: JOURNAL ENTRIES:Foreign Currency Transaction FINANCIAL STATEMENT PRESENTATION INCOME STATEMENT JOURNAL ENTRIES ON FEBRUARY 28, 2022 (SETTLEMENT DATE):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 inventoOn September 1, 2019 Philips corporation sold merchandise to a foreign customer for 300,000 Brazilian real with payment to be received on March 1, 2020. At the date of sale, Philips entered into a six month forward contract to sell 300,000 reals. The forward contract was properly designated as a fair value hedge. The following exchange rates apply: Date Spot rate Forward rate (to March 1, 2020) September 1, 2019 $0.46 $ 0.49 December 31, 2019 0.50 0.52 March 1, 2020 0.54 Philips’ incremental borrowing rate is 12%. The present value factor at an annual interest rate of 12% is .9610. What journal entry should Philips prepare to record the value of the forward contract on December…
- Leigh of New York sells its products to customers in the United States and the United Kingdom. On December 16, 2019, Leigh sold merchandise on credit to Bronson Ltd. of London at a price of 17,000 pounds. The exchange rate on that day for £1 was $1.4583. On December 31, 2019, when Leigh prepared its financial statements, the rate was £1 for $1.4382. Bronson paid its bill in full on January 15, 2020, at which time the exchange rate was £1 for $1.4482. Leigh immediately exchanged the 17,000 pounds for U.S. dollars. Prepare Leigh’s journal entries on December 16, December 31, and January 15 (round to the nearest dollar).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, 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 $2,820
- On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,030,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,030,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows: Date Spot Rate Forward Rate(to January 31, 2021) October 1, 2020 $ 0.26 $ 0.30 December 31, 2020 0.29 0.33 January 31, 2021 0.31 N/A Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored. Prepare journal entries for the foreign currency forward contract,…On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,030,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,030,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows: Date Spot Rate Forward Rate(to January 31, 2021) October 1, 2020 $ 0.26 $ 0.30 December 31, 2020 0.29 0.33 January 31, 2021 0.31 N/A Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored. Determine the net benefit, if any, realized by Mertag from entering…Arbie 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 October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,038,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,038,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows: Date Spot Rate Forward Rate(to January 31, 2021) October 1, 2020 0.27 0.31 December 31, 2020 0.30 0.34 January 31, 2021 0.32 N/A Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored. Prepare journal entries for the foreign currency…Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2017, with payment of 16,000 korunas to be received on March 1, 2018. Brandlin enters into a forward contract on December 1, 2017, to sell 16,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows: Date Spot Rate Forward rate (to march 1, 2018) December 1 , 2017 $2.70 $2.775 December 31 , 2017 2.80 2.900 March 1, 2018 2.95 N/A Brandlin’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Brandlin must close its books and prepare financial statements at December 31.a. Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars. What is the impact on 2017 net…Pinas Corporation, A Philippine importer, purchased merchandise from the Star Company of Thailand for 100,000 Baht on March 1, 2015, when the spot rate for a Baht was 1.63. The accounts payable denominated on Baht was not due until May 30, 2015 so Pinas immediately entered into a 90-day forward contract to hedge the transaction against exchange rate changes. The contract was made at forward exchange rate of 1.65. Pinas settled the forward contract and the accounts payable on May 30, 2015, when the spot rate for Baht was 1.60. On the settlement of the forward contract on May 30, 2015, Pinas should record a forex gain or (loss) of: A. 5,000 B. (5,000) C. (2,000) D. 2,000