On November 1, 20x6, APIC Corporation sold merchandise to Allan Corporation on November 1, 20x6 for U.S. $50,000. Payment will be received on February 1, 20x7. APIC Corporation entered into forward exchange contracts to hedge the transaction on November 1, 20x6. The fiscal year-end for APIC Corporation is December 31. The exchange rates on various dates are as follows: November 1, 20x6 December 31, 20x6 February 1, 20x7 Spot rate 30-day forward rate 60-day forward rate 90-day forward rate P40.00 P40.25 P40.50 40.35 40.40 40.10 40.55 40,20 40.30 40.65 40.45 40.60 1. How much is the ForEx gain or (loss) on December 31, 20x6 with respect to accounts receivable? A. 2,500 C. (2,500)

On November 1, 20x6, APIC Corporation sold merchandise to Allan Corporation on November 1, 20x6 for U.S. $50,000. Payment will be received on February 1, 20x7. APIC Corporation entered into forward exchange contracts to hedge the transaction on November 1, 20x6. The fiscal year-end for APIC Corporation is December 31. The exchange rates on various dates are as follows: November 1, 20x6 December 31, 20x6 February 1, 20x7 Spot rate 30-day forward rate 60-day forward rate 90-day forward rate P40.00 P40.25 P40.50 40.35 40.40 40.10 40.55 40,20 40.30 40.65 40.45 40.60 1. How much is the ForEx gain or (loss) on December 31, 20x6 with respect to accounts receivable? A. 2,500 C. (2,500)

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter9: Taxation Of International Transactions

Section: Chapter Questions

Problem 28P

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On November 20, 20X5, Diamond Corporation, a calendar-year US corporation, had merchandise delivered from a vendor in France. The invoice was for 350,000 euro and was due January 20, 20X6. On December 13, 20X5, Diamond’s British division sold the merchandise and issued the customer an invoice for 400,000 pounds due February 13, 20X6. Both invoices were paid on their due date. Exchange rates were as follows: Date Euro British Pound November 20, 20X5 $1.1698 $1.6356 December 13, 20X5 1.1713 1.6317 December 31, 20X5 1.1684 1.6286 January 20, 20X6 1.1665 1.6334 February 13, 20X6 1.1652 1.6293 Determine the net exchange gain/(loss) from the above purchase and sale transactions to be included in Diamond’s Income Statement for 20X5 and 20X6. Identify whether it is a gain or loss. 20X5 Income Statement 20X6 Income Statement
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On August 1, Ling-Harvey Corporation (a U.S.-based importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 ringgits. Ling-Harvey will receive and make payment for the merchandise in three months on October 31. On August 1, Ling-Harvey entered into a forward contract to purchase 400,000 ringgits in three months at a forward rate of $0.60. It properly 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. Relevant exchange rates for the ringgit are as follows: Date Spot rate Forward rate ( to October 31) August 1 $0.60 $0.60 September30 0.63 0.66 October 31 0.68 N/A Ling-Harvey’s incremental borrowing rate is 12 percent. The present value factor for one month at an annual interest rate of 12 percent (1 percent per month) is 0.9901. Ling-Harvey must close its books and prepare its third-quarter financial…
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