On October 1, Year 7 Durian Co. of Quebec, ordered merchandise from MAGA Co. of US. The purchase price was determined to be $500,000 US. The merchandise was to be delivered on February 28th, Year 8 with payment due on delivery. On October 1, Year 7 Durian arranged a forward contract to purchase $500,000 US on February 28th, Year 8 at a rate of US 1 = $1.31. The merchandise was delivered on February 28th, Year 8, Durian purchased the US dollars from the bank and paid MAGA Co. Durian’s year-end is December 31st. Date Spot rate Forward rate October 1, Year 7 US 1 = $1.23 US 1 = $1.31 December 31, Year 7 US 1 = $1.21 US 1 = $1.33 February 28, Year 8 US 1 = $1.28 US 1 = $1.28 Required Assume the forward contract is designated as i) FV hedge ii) Cash Flow hedge iii) No hedge Prepare all JEs

On October 1, Year 7 Durian Co. of Quebec, ordered merchandise from MAGA Co. of US. The purchase price was determined to be $500,000 US. The merchandise was to be delivered on February 28th, Year 8 with payment due on delivery. On October 1, Year 7 Durian arranged a forward contract to purchase $500,000 US on February 28th, Year 8 at a rate of US 1 = $1.31. The merchandise was delivered on February 28th, Year 8, Durian purchased the US dollars from the bank and paid MAGA Co. Durian’s year-end is December 31st. Date Spot rate Forward rate October 1, Year 7 US 1 = $1.23 US 1 = $1.31 December 31, Year 7 US 1 = $1.21 US 1 = $1.33 February 28, Year 8 US 1 = $1.28 US 1 = $1.28 Required Assume the forward contract is designated as i) FV hedge ii) Cash Flow hedge iii) No hedge Prepare all JEs

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 5EB: Review the following transactions and prepare any necessary journal entries for Lands Inc. A. On...

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Review the following transactions, and prepare any necessary journal entries for Sewing Masters Inc. A. On October 3, Sewing Masters Inc. purchases 800 yards of fabric (Fabric Inventory) at $9.00 per yard from a supplier, on credit. Terms of the purchase are 1/5, n/40 from the invoice date of October 3. B. On October 8, Sewing Masters Inc. purchases 300 more yards of fabric from the same supplier at an increased price of $9.25 per yard, on credit. Terms of the purchase are 5/10, n/20 from the invoice date of October 8. C. On October 18, Sewing Masters pays cash for the amount due to the fabric supplier from the October 8 transaction. D. On October 23, Sewing Masters pays cash for the amount due to the fabric supplier from the October 3 transaction.
Review the following transactions and prepare any necessary journal entries for Lands Inc. A. On December 10, Lands Inc. contracts with a supplier to purchase 450 plants for its merchandise inventory, on credit, for $12.50 each. Credit terms are 4/15, n/30 from the invoice date of December 10. B. On December 28, Lands pays the amount due in cash to the supplier.
X Company accepts goods on consignment from C Company, and also purchases goods from P Company during the current month. X Company plans to sell the merchandise to customers during the following month. In each of these independent situations, who owns the merchandise at the end of the current month, and should therefore include it in their companys ending inventory? Choose X, C, or P. A. Goods ordered from P, in transit, with shipping terms FOB destination. B. Goods ordered from P, in transit, with shipping terms FOB shipping point. C. Goods ordered from P, inventory in stock, held in storage until floor space is available. D. Goods ordered from C, inventory in stock, set aside for customer pickup and payments to finalize sale.
On November 15 20x1,. Lemon co. ordered merchandise, on an FOB shiping point term, from a foreign entity for 200,000 marks. The merchandise was shipped and invoiced to Lemon on December 10 20x1. Lemon paid the invoice on January 10, 20x2. The spot rates are as follows: Nov. 15, 20x1 P22.4955 December 10, 20x1 P22.4875 December 31, 20x1 P22.4675 January 10, 20x2 P22.4475 Requirement: Provide the journal entries in 20x1 and 20x2
. Stark, Inc., placed anorder for inventory costing 500,000 FC with a foreign vendor on April 15 when the spot ratewas 1 FC ¼ $0.683. Stark received the goods on May 1 when the spot rate was 1 FC ¼ $0.687.Also on May 1, Stark entered into a 90-day forward contract to purchase 500,000 FC at a forward rate of 1 FC ¼ $0.693. Payment was made to the foreign vendor on August 1 when thespot rate was 1 FC ¼ $0.696. Stark has a June 30 year-end. On that date, the spot rate was1 FC ¼ $0.691, and the forward rate on the contract was 1 FC ¼ $0.695. Changes in thecurrent value of the forward contract are measured as the present value of the changes in theforward rates over time and no separate accounting is given the time value of the contract. Therelevant discount rate is 6%.1. Prepare all relevant journal entries suggested by the above facts assuming that the hedge isdesignated as a fair value hedge.2. Prepare a partial income statement and balance sheet as of the company’s June 30 year-endthat…
Stark, Inc., placed an order for inventory costing 500,000 FC with a foreign vendor on April 15 when the spot rate was 1 FC = $0.683. Stark received the goods on May 1 when the spot rate was 1 FC = $0.687. Also on May 1, Stark entered into a 90-day forward contract to purchase 500,000 FC at a forward rate of 1 FC = $0.693. Payment was made to the foreign vendor on August 1 when the spot rate was 1 FC = $0.696. Stark has a June 30 year-end. On that date, the spot rate was 1 FC = $0.691, and the forward rate on the contract was 1 FC = $0.695. Changes in the current value of the forward contract are measured as the present value of the changes in the forward rates over time and no separate accounting is given the time value of the contract. The relevant discount rate is 6%.1. Prepare all relevant journal entries suggested by the above facts assuming that the hedge is designated as a fair value hedge.2. Prepare a partial income statement and balance sheet as of the company’s June 30…
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Principles of Accounting Volume 1

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9781947172685

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Date	Spot rate	Forward rate
October 1, Year 7	US 1 = $1.23	US 1 = $1.31
December 31, Year 7	US 1 = $1.21	US 1 = $1.33
February 28, Year 8	US 1 = $1.28	US 1 = $1.28