On October 20, 2020, Corporation H entered a contract to receive two million Argentinian pesos on January 20, 2021, for $100,000 based on a $1 per exchange rate futures contract (three months). 20 Argentinian pesos. This contract is a derivative because its value depends on the future value of the Argentinian peso against the dollar. On December 21 of that year, how should this contract (forward) be presented in the financial statements? Must be shown only as an asset at market value Must be shown as assets and liabilities at market value Should only be disclosed in the notes to the financial statements Should be shown only as a liability at market value.
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On October 20, 2020, Corporation H entered a contract to receive two million Argentinian pesos on January 20, 2021, for $100,000 based on a $1 per exchange rate futures contract (three months). 20 Argentinian pesos. This contract is a derivative because its value depends on the future value of the Argentinian peso against the dollar. On December 21 of that year, how should this contract (forward) be presented in the financial statements?
- Must be shown only as an asset at market value
- Must be shown as assets and liabilities at market value
- Should only be disclosed in the notes to the financial statements
- Should be shown only as a liability at market value.
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- The 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 November 1, 2019, Flower Company, a U.S. company, entered into a four-month forward contract to sell 50,000 liras on February 1, 2020. The following U.S. dollar per lira exchange rates apply: Date Spot rate Forward Rate (to Feb 1st 2020) November 1, 2019 $0.092 $0.105 December 31, 2019 $0.090 $0.095 February 1, 2020 $0.089 N/A Flower's incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent is .9803. Which of the following is included in Flower's December 31, 2019 balance sheet for the forward contract?On 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 December 12, 2022, Tin Company entered into a forward exchange contract to purchase 500,000 euros in 90 days.The relevant exchange rates are as follows: Spot rate Forward rate (for 3/12/2023)November 30, 2022 P0.56 P0.57December 12, 2022 P0.57 P0.58December 31, 2022 P0.61 P0.60March 12, 2023 P0.62 P0.62 The purpose of this forward contract is to hedge a purchase of inventory in November 30, 2022, payable in March 2023. How much is the net forex gain/loss December 31, 2022? (just encode the absolute amount)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 . 0.1386Q17. October 20, 2020, Corporation D entered a contract to receive two million Argentine pesos on January 20, 2021, for $100,000 based on a $1 per exchange rate futures contract (three months). 20 Argentine pesos. (Why would D Corporation get this contract? A) Corporation D believes that the value of the Argentine peso will increase at the same rate as the dollar B) Corporation D believes that Argentine's economy will grow at a lower rate than that of the United States. C) You could be protecting yourself from a future need to make a payment in Mexican pesos D) Corporation D believes that the value of the Argentine peso will decrease relative to the dollar.
- 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 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: Date Spot Rate Put option premium for September 1 (strike price $0.062) June 1 $0.062 $0.0025 June 30 0.066 0.0018 September 1 0.061 N/A 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…On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a two-year, 1,000,000 Chinese yuan loan from a Chinese bank at an interest rate of 2 percent per year. The company makes interest payments annually on September 30 and will repay the principal on September 30, 2022. PFI prepares U.S. dollar financial statements and has a December 31 year-end. Relevant exchange rates are as follows: Date U.S. Dollar per Chinese Yuan (CNY) September 30, 2020 $ 0.100 December 31, 2020 0.105 September 30, 2021 0.120 December 31, 2021 0.125 September 30, 2022 0.150 Prepare all journal entries related to this foreign currency borrowing. Taking the exchange rate effect on the cost of borrowing into consideration, determine the effective interest rate in U.S. dollars on the loan in each of the three years 2020, 2021, and 2022.
- On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a two-year, 1,900,000 Chinese yuan loan from a Chinese bank at an interest rate of 4 percent per year. The company makes interest payments annually on September 30 and will repay the principal on September 30, 2022. PFI prepares U.S. dollar financial statements and has a December 31 year-end. Relevant exchange rates are as follows: Date U.S. Dollar per Chinese Yuan (CNY) September 30, 2020 $ 0.190 December 31, 2020 0.195 September 30, 2021 0.210 December 31, 2021 0.215 September 30, 2022 0.240 Taking the exchange rate effect on the cost of borrowing into consideration, determine the effective interest rate in U.S. dollars on the loan in each of the three years 2020, 2021, and 2022.On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a two-year, 2,500,000 Chinese yuan loan from a Chinese bank at an interest rate of 4 percent per year. The company makes interest payments annually on September 30 and will repay the principal on September 30, 2022. PFI prepares U.S. dollar financial statements and has a December 31 year-end. Relevant exchange rates are as follows: Date U.S. Dollar per Chinese Yuan (CNY) September 30, 2020 $ 0.140 December 31, 2020 0.145 September 30, 2021 0.160 December 31, 2021 0.165 September 30, 2022 0.190 Prepare all journal entries related to this foreign currency borrowing.On January 10, Volkswagen agrees to import auto parts worth $7 million from the U.S. The parts will be delivered on March 4 and are payable immediately in dollars. VW decides to hedge its dollar position by entering into IMM futures contracts. The spot rate is $1.3447/€ and the March futures price is $1.3502. On March 4, the spot rate turns out to be $1.3452/€, while the March futures price is $1.3468/€. Calculate VW’s net euro gain or loss on its futures position. $13,850 loss $13,850 gain $17,850 loss $17,850 gain