On January 1, 2020, Oriole Inc. entered into a futures contract to purchase U.S. $5,390 for $5,670 Canadian in 30 days on the Futures Exchange. On January 15, the fair value of the contract was $39 (reflecting the present value of the future cash flows under the contract). Oriole Inc. was required to deposit $22 with the stockbroker as a margin. Prepare the journal entries to update the books on January 1 and 15. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)
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- At 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 $130,000The following information applies to Datu Corporation’s sale of 10,000 foreign currency units under a forward contract dated November 1, 2020 for delivery on January 21, 2021: November 1, 2020 December 31, 2020 Spot rates 30-day futures 90-day futures P0.80 0.79 0.78 P0.83 0.82 0.81 Datu entered into a forward contract to speculate in the foreign currency. 6. In Datu’s income statement for the year December 31, 2020,On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,140,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,140,000 pesos in three months at a strike price of $0.080. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Date Spot Rate Put Option Premiumfor September 1(strike price $0.080) June 1 $ 0.080 $ 0.0043 June 30 0.079 0.0031 September 1 0.078 N/A Maxwell must close its books and prepare its second-quarter financial statements on June 30. a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2.…
- On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,100,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,100,000 pesos in three months at a strike price of $0.074. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Date Spot Rate Put Option Premium for September 1 (strike price $0.074) June 1 $ 0.074 $ 0.0037 June 30 0.073 0.0028 September 1 0.072 N/A Maxwell must close its books and prepare its second-quarter financial statements on June 30. Required: a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2. What is the…On January 1, 2021, LLB Industries borrowed $360,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 10% fixed interest rate on a notional amount of $360,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% June 30, 2021. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as indicated below. January 1…On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,080,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,080,000 pesos in three months at a strike price of $0.106. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Date Spot Rate Put Option Premiumfor September 1(strike price $0.106) June 1 $ 0.106 $ 0.0069 June 30 0.105 0.0044 September 1 0.104 N/A Maxwell must close its books and prepare its second-quarter financial statements on June 30. a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars.…
- 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?On January 1, 2021, Labtech Circuits borrowed $160,000 from First Bank by issuing a three-year, 9% note, payable on December 31, 2023. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. Therefore, Labtech entered into a three-year interest rate swap agreement on January 1, 2021, and designated the swap as fair value hedge. The agreement called for the company to receive payment, based on an 9% fixed interest rate on a notional amount of $160,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract cash settlement of the new interest amount on December 31 of each year. Floating (LIBOR) settlement rates were 9% at inception and 10%, 8%, and 8% at the end of 2021, 2022, and 2023, respectively. The fair values of the swap are quotes obtained from a derivatives dealer. These quotes and the fair values of the note are as follows:…On 1 January 2019, Azzurri Berhad sold a stock item with a cost of RM50,000 to Mancini Berhad. The terms of the sale include a five-yearly instalment of RM15,000, each payable at the end of every year. The cash selling price of the stock is RM60,000. An effective interest rate of 7.931% should be used in any calculations With reference to relevant Malaysian Financial Reporting Standards (MFRS), prepare the respective journal entries for the years ended 31 December 2019 and 31 December 2020
- On January 1, 2021, Labtech Circuits borrowed $290,000 from First Bank by issuing a three-year, 9% note, payable on December 31, 2023. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. Therefore, Labtech entered into a three-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. The agreement called for the company to receive payment based on an 9% fixed interest rate on a notional amount of $290,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract called for cash settlement of the net interest amount on December 31 of each year. Floating (LIBOR) settlement rates were 9% at inception and 10%, 8%, and 8% at the end of 2021, 2022, and 2023, respectively. The fair values of the swap are quotes obtained from a derivatives dealer. These quotes and the fair values of the note are as follows: January 1 December 31 2021 2021 2022…On January 1, 2021, Labtech Circuits borrowed $216,000 from First Bank by issuing a three-year, 9% note, payable on December 31, 2023. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. Therefore, Labtech entered into a three-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. The agreement called for the company to receive payment based on an 9% fixed interest rate on a notional amount of $216,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract called for ash settlement of the net interest amount on December 31 of each year. Floating (LIBOR) settlement rates were 9% at inception and 10%, 8%, and 8% at the end of 2021, 2022, and 2023, respectively. The fair values of the swap are quotes contained from a derivatives dealer. Those quotes and the fair values of the note are as follows:…On January 1, 2021, Labtech Circuits borrowed $252,000 from First Bank by issuing a three-year, 6% note, payable on December 31, 2023. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. Therefore, Labtech entered into a three-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. The agreement called for the company to receive payment based on an 6% fixed interest rate on a notional amount of $252,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract called for cash settlement of the net interest amount on December 31 of each year.Floating (LIBOR) settlement rates were 6% at inception and 7%, 5%, and 5% at the end of 2021, 2022, and 2023, respectively. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as follows: January 1 December 31 2021 2021 2022 2023…