Loose Leaf Advanced Accounting with Connect Access Card
12th Edition
ISBN: 9781259184741
Author: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 2DYS
To determine
Search current U.S. authoritative accounting literature to determine whether management’s intent is sufficient to assess that a
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Suppose that you are a finance manager at a U.S. based MNC. On January 1st, you anticipate you will need to purchase C170,000.00 (Canadian
dollars) worth of supplies from a Canadian supplier in March using Canadian dollars (C$). The current spot rate $105,400.00 an dollar is $0.73.
Suppose that on February 10th, you find out your MNC no longer needs the order of Canadian supplies and, th
Therefore, you wish to close out your futures position.
In order to close out your futures position in Canadian dollars, you would
a futures contract specifying
of March 10th. If the futures contracts for Canadian dollars are priced at $0.62, then your MNC would receive
date from that contract in exchange for C$170,000.00.
$147,560.00
$137,020.00
$126,480.00
ed Canadian dollars.
with a settlement date
on the settlement
You manage the international business for a manufacturing company. You are responsible for the overall profitability of your business unit. Your company ships your products to Malaysia. The retail stores that buy your products there pay you in their local currency, the Malaysian ringgit (MYR). All sales for the first quarter are paid on April 1st and use the exchange rate at the close of business on April 1st or the first business day after April 1st if it falls on a Saturday or Sunday. The company has sales contracts with different vendors that determine the number of units sold well in advance. The company is contractually obligated to sell 4,000 units for exactly 1.25 million MYR for the first quarter. The break-even point for each unit is $90 in U.S. dollars. Use the following foreign exchange rates:
On January 1, the daily spot rate is 3.13 MYR, and the forward rate is 0.317 U.S. dollars/MYR for April 1st of the same year.
On April 1, the daily spot rate is 3.52 MYR.
Scenario 3:…
MMA plc., is a UK-based manufacturer of heavy machine components for the power industry. MMA exports a significant proportion of its products to clients in the US. In order to compete with other US suppliers of heavy machine components, MMA prices its exports in US dollars. It is March 2021 and MMA has just shipped a large consignment worth $50 million to TLP Inc., one of MMA’s major clients in the US. Payment for this shipment is due in 90-days.
MMA treasury department is concerned about the recent volatility of the dollar[1]pound exchange rates and has suggested that its exposure to the US dollar should be hedged.
The following currency and money market quotes are available today:
Spot Rate (bid – ask): US$1.5077/£ - US$1.5379/£
Barclays 90-day forward quote ((bid – ask): US$1.5025/£ - US$1.5432
90-day dollar deposit interest rate: 0.8% per annum
90-day pound deposit interest: 1.2% per annum
90-day US dollar borrowing rate: 1.2% per annum
90-day pound borrowing rate: 1.8% per annum…
Chapter 9 Solutions
Loose Leaf Advanced Accounting with Connect Access Card
Ch. 9 - Prob. 1QCh. 9 - Prob. 2QCh. 9 - What factors create a foreign exchange gain on a...Ch. 9 - Prob. 4QCh. 9 - How does a foreign currency option differ from a...Ch. 9 - Prob. 6QCh. 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. 11QCh. 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. 15QCh. 9 - In what way is the accounting for a foreign...Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 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 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 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 - Prob. 32PCh. 9 - On June 1, Alexander Corporation sold goods to a...Ch. 9 - Prob. 34PCh. 9 - Prob. 35PCh. 9 - Prob. 36PCh. 9 - Prob. 37PCh. 9 - Prob. 38PCh. 9 - Prob. 39PCh. 9 - Prob. 40PCh. 9 - Prob. 41PCh. 9 - Prob. 42PCh. 9 - RESEARCH CASEINTERNATIONAL FLAVORS AND FRAGRANCES...Ch. 9 - Prob. 2DYSCh. 9 - Prob. 4DYSCh. 9 - COMMUNICATION CASEFORWARD CONTRACTS AND OPTIONS...
Knowledge Booster
Similar questions
- Lalua Co is a US firm has planning to export its products to Singapore since its decision to supplement its declining U.S. sales by exporting there. Furthermore, Lalua Co. also has recently begun exporting to a retailer in United Kingdom. Below are the details of transactions for Lalua Co. through out of the year: - i. Blades has forecasted sales in the United States of 520,000 pairs of Speedos at regular prices which is $115; exports to Singapore of 180,000 pairs of speedos for SGD25 a pair; and exports to the United Kingdom of 200,000 pairs of Speedos for £80 per pair. ii. Cost of goods sold for 800,000 pairs of speedos are incurred in Singapore with the price of SGD 15; the remainder is incurred in the United States, where the cost of goods sold per pair of Speedos runsapproximately $70. iii. Fixed cost are $2 million and variable operating expenses other than costs of goods sold represent approximately 12 percent of U.S. sales. All fixed and variable operating expenses other than…arrow_forwardOn 1 July 2019 Celine Consultants Ltd completes a contract to provide advice on the installation of a networked computer system to a company in the US. The client pays the fee of US$700 000 into Celine Consultants’ US bank account on that date. The bank pays interest of 5 per cent annually on 30 June. The exchange rate information is: 1 July 2019 $A1 = US$0.59 30 June 2020 $A1 = US$0.67 What journal entries are required in Celine Consultants Ltd’s books for 1 July 2019 and 30 June 2020arrow_forwardAlice Inc. imports manufactured goods from Ireland to the U.S. Alice’s revenues are primarily in US dollars and expenses are primarily in Euros. The CEO of Alice is concerned about her currency exposure over the next six months and is considering engaging in an option contract with Euros as the underlying asset (S). Which transaction would you recommend?a) Buy callsb) Buy putsc) Write callsd) Write putse) Options are unable to hedge Euro expensesarrow_forward
- Taft Corporation operates primarily in the United States. However, a few years ago it opened a plant in Spain to produce merchandise to sell there. This foreign operation has been so successful that during the past 24 months the company started a manufacturing plant in Italy and another in Greece. Financial information for each of these facilities follows:The company’s domestic (U.S.) operations reported the following information for the current year:Taft has adopted the following criteria for determining the materiality of an individual foreign country: (1) Sales to unaffiliated customers within a country are 10 percent or more of consolidated sales or (2) long-lived assets within a country are 10 percent or more of consolidated long-lived assets.Apply Taft’s materiality tests to identify the countries to report separately with respect to (a) revenues and (b) long-lived assets.arrow_forwardVictoria Exports (Canada). A Canadian exporter, Victoria Exports, will be receiving six payments of €13,400, ranging from now to 12 months in the future. Since the company keeps cash balances in both Canadian dollars and U.S. dollars, it can choose which currency to exchange the euros for at the end of the various periods. Which currency appears to offer the better rates in the forward market? (Click on the icon to import the table into a spreadsheet.) U Period spot 1 month 2 months 3 months 6 months 12 months Period Days Forward Spot 1 month 2 months Days Forward 30 60 90 180 360 0 30 60 Calculate the forward premium, the Canadian dollar proceeds, and the difference from the spot rate proceeds in the C$/Euro forward market below: (Round the forward premium to three decimal places and the Canadian dollar amounts to the nearest cent.) C$/euro C$/euro 1.3337 1.3364 1.3386 1.3412 1.3437 1.3461 1.3337 1.3364 1.3386 US$/euro 1.3217 1.3220 1.3222 1.3225 1.3230 1.3256 Forward Premium on the…arrow_forwardSuppose that Nevada Co., a US-based MNC, makes regular, monthly purchases of materials from a German supplier named Spicurity. These regular payments are typically in the amount of 250,000 euros. Last month the exchange rate was $1.44 per euro. Nevada Co. only has cash reserves in dollars, while Spicurity only has cash reserves in euros. Suppose both companies use the same bank. In order to conduct this transaction last month, Nevada Co. required $ transaction reduced Nevada's account by this amount, denominated in dollars and credited it to Spicurity's account. 360,000.00 to pay for the materials. Thus, the bank handling the The bank then converted this amount to Marrow_forward
- IIllustration One Wazalendo Company is a Tanzanian company with exports and imports trade with the United Kingdom [UK] and the United States of America [USA]. The following transactions, in the currency specified, are due within the next six months: • Purchase of goods from UK, cash payment due in three months £15,500 • Sale of goods purchased from UK to a USA customer, cash receipts due in 6 months US$ 29,000 • Purchase of goods from USA, cash payment due in three months US$ 150,000 • Sale of goods purchased from USA to a UK customer, cash receipts due in 6 months £75,000 The spot and forward exchange rates are as follows: TZS/UK £ TZS/US$ Spot 2,600-2,700 1,350-1,360 Three months forward 2,750-2,800 1,400-1,450 Six months forward 2,850-2,900 1,550-1,600 Required: Determine the profit or loss to be made by Wazalendo Company on the import-export business assuming that the company arranges to cover the transactions in the forward market.arrow_forward4. A reputed importer in Canada wants to import certain items from you. The importer isready to place repeated order of INR 500000 each but demands credit period of 90 daysfrom the receipt of goods in Canada. Which payment method you will choose? Whataccording to you is the safest method of payment in International Trade? Discuss with thehelp of suitable example.arrow_forwardA company,whose products are sold in 30 countries worldwide, is an integrated Canadian forest products company. compeny sells the majority of its lumber products in the United States and a significant amount of its pulp products in asia.Demon also has loans from other countries. For example, on June 18, 2018, the company borrowed US$160 million at an annual interest rate of 12%. compeny must repay this loan, and interest, in U.S.dollars One of the challenges global companies face is to make themselves attractive to investors from other currencies. This is difficult to do when different accounting rules in different countries blur the real impact of earnings. For example, in 2018 compenyreported a loss of $2.3 million, using a accounting rules.Had it reported under U.S. accounting rules, its loss would have been $12.1 million. Many companies that want to be more easily compared with U.S and other global competitors have switched to U,S. accounting principles. a National Railway.…arrow_forward
- Assessing Translation Exposure Assume the euro’s spot rate is presently equal to $1.00. All of the following firms are based in New York and are the same size. While these firms concentrate on business in the United States, their entire foreign operations for this quarter are provided here. Company A expects its exports to cause cash inflows of 9 million euros and imports to cause cash outflows equal to 3 million euros. Company B has a subsidiary in Portugal that expects revenue of 5 million euros and has expenses of 1 million euros. Company C expects exports to cause cash inflows of 9 million euros and imports to cause cash outflows of 3 million euros, and will repay the balance of an existing loan equal to 2 million euros. Company D expects zero exports and imports to cause cash outflows of 11 million euros. Company E will repay the balance of an existing loan equal to 9 million euros. Which of the five companies described here has the highest degree of translation exposure?arrow_forwardYour firm is a U.S.-based supplier of agricultural parts. A European customer just made a €50,000 purchase on trade credit terms of net 30 days. At the time of the sale, the exchange rate was EUR/USD 1.19. The projected exchange rate in 30 days is EUR/USD 1.21. Calculate the value of accounts receivable on the date of the sale. a. $41,322.31 b. $42,016.81 C. $59,500.00 d. $60,500.00arrow_forwardABC Inc. produces home appliances and sells them in the U.S. It outsources the production of the appliances to a Vietnamese manufacturer, and the imported appliances are priced in dollars. Its major competitor for appliances is located in China. Based on this information, ABC Inc. is subject to ____ exposure. A. economic B. translation C. economic and transaction D. transactionarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT