ADVANCED ACCOUNTING-LL
13th Edition
ISBN: 9781260232486
Author: Hoyle
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 9, Problem 10P
To determine
Identify the manner in which the R company will report the forward contract on December 31, 2017
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On December 1, 2017, Ringling Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,000,000 pesos on March 1, 2018. The following U.S. dollar per peso exchange rates apply:
Date Spot Rate ForwardRate (to March 1, 2018)Dec1, 2017 $0.044 $0.047 Dec 31, 2017 0.046 0.049 March 1, 2018 0.050 N/A
Ringling’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803.Which of the following correctly describes the manner in which Ringling Company will report the forward contract on its December 31, 2017, balance sheet? Choose the correct.a. As an asset in the amount of $1,960.60.b. As an asset in the amount of $2,940.90.c. As a liability in the amount of $980.30.d. As a liability in the amount of $2,940.90.
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 October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to sell 100,000 rubles in four months (on January 31, 2018) and receive $39,000 in U.S. dollars. Exchange rates for the ruble follow:
Date
Spot rate
Forward Rate (to January 31,2018)
October 1, 2017
$0.35
$0.39
December 31, 2017
0.38
0.41
January 31, 2018
0.40
N/A
Sharp’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. Sharp must close its books and prepare financial statements on December 31.a. Prepare journal entries, assuming that Sharp entered into the forward contract as a fair value hedge of a 100,000 ruble receivable arising from a sale made on October 1, 2017. Include entries for both the sale and the forward contract.b. Prepare journal entries, assuming that Sharp entered into the forward contract as a fair value hedge of a firm commitment related to a 100,000…
Chapter 9 Solutions
ADVANCED ACCOUNTING-LL
Ch. 9 - Prob. 1QCh. 9 - Prob. 2QCh. 9 - What factors create a foreign exchange gain on a...Ch. 9 - In what way is the accounting for a foreign...Ch. 9 - Prob. 5QCh. 9 - How does a foreign currency option differ from a...Ch. 9 - Prob. 7QCh. 9 - Why would a company prefer a foreign currency...Ch. 9 - How do companies report foreign currency...Ch. 9 - How does a company determine the fair value of a...
Ch. 9 - What is hedge accounting?Ch. 9 - Prob. 12QCh. 9 - What are the differences in accounting for a...Ch. 9 - What are the differences in accounting for a...Ch. 9 - What are the differences in accounting for a...Ch. 9 - Prob. 16QCh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Grace Co. had a Chinese yuan payable resulting...Ch. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - Prob. 10PCh. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - On March 1, Pimlico Corporation (a U.S.-based...Ch. 9 - Torres Corporation (a U.S.-based company) expects...Ch. 9 - Prob. 15PCh. 9 - What was the net impact on Jensen Companys 2018...Ch. 9 - What was the net increase or decrease in cash flow...Ch. 9 - What is the net impact on Micros net income for...Ch. 9 - What is the net impact on Micros net income for...Ch. 9 - What is Micros net increase or decrease in cash...Ch. 9 - What is the net impact on Dos Santos Companys 2017...Ch. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 26PCh. 9 - Prob. 27PCh. 9 - Prob. 28PCh. 9 - Prob. 29PCh. 9 - Prob. 30PCh. 9 - Prob. 31PCh. 9 - Use the same facts as in Problem 31 except that...Ch. 9 - On June 1, Alexander Corporation sold goods to a...Ch. 9 - On June 1, Cairns Corporation purchased goods...Ch. 9 - Prob. 35PCh. 9 - Prob. 36PCh. 9 - Prob. 37PCh. 9 - Prob. 38PCh. 9 - Prob. 39PCh. 9 - Prob. 40PCh. 9 - Based on past experience, Leickner Company expects...Ch. 9 - Prob. 42PCh. 9 - RESEARCH CASEINTERNATIONAL FLAVORS AND FRAGRANCES...Ch. 9 - Prob. 2DYSCh. 9 - Prob. 3DYSCh. 9 - ANALYSIS CASECASH FLOW HEDGE On February 1, 2017,...Ch. 9 - Prob. 5DYSCh. 9 - COMMUNICATION CASEFORWARD CONTRACTS AND OPTIONS...
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