Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it. The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

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Answer 1

Question

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

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The investments of Charger Inc. include an investment of trading securities of Raiders Inc. purchased on February 24, 20Y7, for $693,000. The fair value of the securities on December 31, 20Y7, is $924,000. a. Journalize the entries for the February 24 purchase and the adjustment to fair value on December 31, 20Y7. If an amount box does not require an entry, leave it blank. 20Y7 Feb. 24 20Y7 Dec. 31 b. How is a unrealized gain or loss for trading investments reported on the financial statements? The unrealized gain or unrealized loss on trading investments is reported on the (or a separate item if significant). Unrealized losses would be in determining net income, while unrealized gains would be in determining net income... c. If the Raiders Inc. securities had been classified as available-for-sale securities, how would the investment be reported on the financial statements? The unrealized gain on available-for-sale investments would be reported as The debit balance of Valuation…

Beresford Inc. purchased several investments in debt securities during 2020, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent. Held-to-Maturity Fair Value Fair Value Amortized Cost Amortized Cost Securities: 12/31/2020 12/31/2021 12/31/2020 12/31/2021 АВС Со. Вonds $385,000 $410,000 $377, 500 $370, 000 Fair Value Fair Value Trading Securities: 12/31/2021 $ 66,000 $ 87,000 $ 48,500 12/31/2020 Cost DEF Co. Bonds $ 55,000 $ 57,000 $ 54,000 $ 69,100 $ 49,000 $ 42,900 GEH Inc. Bonds IJK Inc. Bonds Available-for-Sale Fair Value Fair Value Cost 12/31/2020 $147,400 Securities: 12/31/2021 LMN Co. Bonds $161,900 $150, 000 What balance sheet amount would Beresford report for the total of its investments in bonds at 12/31/2020?

Some of Cullumber Lake Limited's investment securities are classified as trading securities and some are classified as non- trading. The cost and fair value of each category at December 31, 2020, were as follows. Trading securities Nokn-trading securities Cost ¥96,500 ¥59,500 Fair Value ¥85,000 $64,000 Unrealized Gain (Loss) ¥(11,500 ) ¥4,500 At December 31, 2019, the Fair Value Adjustment-Trading account had a debit balance of ¥2,600, and the Fair Value Adjustment-Non-Trading account had a credit balance of ¥6,200. Prepare the required journal entries for each group of securities for December 31, 2020.

Answer 2

Question

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

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Answer 3

Question

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

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Answer 4

Question

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

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Answer 5

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

Answer 6

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

Answer 7

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

Answer 8

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

Answer 9

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

Answer 10

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

Answer 11

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

Answer 12

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Answer 15

Ch. 11 - Prob. 11.1Q Ch. 11 - Prob. 11.2Q Ch. 11 - The U.S. dollar strengthened against the European...Ch. 11 - Prob. 11.4Q Ch. 11 - Prob. 11.5Q Ch. 11 - How are assets and liabilities denominated in a...Ch. 11 - Prob. 11.7Q Ch. 11 - Prob. 11.8Q Ch. 11 - Prob. 11.9Q Ch. 11 - Distinguish between an exposed net asset position...

Solution Summary: The author explains that hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc.

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