LooseLeaf for Advanced Accounting (Irwin Accounting) - Standalone book
13th Edition
ISBN: 9781259444951
Author: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Publisher: McGraw-Hill Education
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Chapter 9, Problem 13P
On March 1, Pimlico Corporation (a U.S.-based company) expects to order merchandise from a supplier in Sweden in three months. On March 1, when the spot rate is $0.10 per Swedish krona, Pimlico enters into a forward contract to purchase 500,000 Swedish kroner at a three-month forward rate of $0.12. At the end of three months, when the spot rate is $0.115 per Swedish krona, Pimlico orders and receives the merchandise, paying 500,000 kroner. What amount does Pimlico report in net income as a result of this cash flow hedge of a
- a. $10,000 premium expense plus a $7,500 positive adjustment to net income when the merchandise is purchased.
- b. $10,000 Discount expense plus a $5,000 positive adjustment to net income when the merchandise is purchased.
- c. $2,500 premium expense plus a $5,000 negative adjustment to net income when the merchandise is purchased.
- d. $2,500 premium expense plus a $2,500 positive adjustment to net income when the merchandise is purchased.
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On March 1, Pimlico Corporation (a U.S.-based company) expects to order merchandise from a supplier in Sweden in three months. On March 1, when the spot rate is $0.10 per Swedish krona, Pimlico enters into a forward contract to purchase 500,000 Swedish kroner at a three-month forward rate of $0.12. At the end of three months, when the spot rate is $0.115 per Swedish krona, Pimlico orders and receives the merchandise, paying 500,000 kroner. What amount does Pimlico report in net income as a result of this cash flow hedge of a forecasted transaction?a. $10,000 premium expense plus a $7,500 positive adjustment to net income when the merchandise is purchased.b. $10,000 Discount expense plus a $5,000 positive adjustment to net income when the merchandise is purchased.c. $2,500 premium expense plus a $5,000 negative adjustment to net income when the merchandise is purchased.d. $2,500 premium expense plus a $2,500 positive adjustment to net income when the merchandise is purchased.
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: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 statements on September 30.a. Prepare journal entries for the forward contract and firm commitment through October 31.b.…
Choose the correct.On March 1, Pimlico Corporation (a U.S.-based company) expects to order merchandise from a supplier in Sweden in three months. On March 1, when the spot rate is $0.10 per Swedish krona, Pimlico enters into a forward contract to purchase 500,000 Swedish kroner at a three-month for-ward rate of $0.12. At the end of three months, when the spot rate is $0.115 per Swedish krona, Pimlico orders and receives the merchandise, paying 500,000 kroner. What amount does Pimlico report in net income as a result of this cash flow hedge of a forecasted transaction?a. $10,000 premium expense plus a $7,500 positive adjustment to net income when the merchandise is purchased.b. $10,000 Discount expense plus a $5,000 positive adjustment to net income when the merchandise is purchased. c. $2,500 premium expense plus a $5,000 negative adjustment to net income when the merchandise is purchased.d. $2,500 premium expense plus a $2,500 positive…
Chapter 9 Solutions
LooseLeaf for Advanced Accounting (Irwin Accounting) - Standalone book
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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