ADVANCED ACCOUNTING
13th Edition
ISBN: 9781260773033
Author: Hoyle
Publisher: MCG
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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
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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$1.5432
90-day dollar deposit interest rate: 0.8% per annum
90-day pound deposit interest: 1.2% per annum
90-day US dollar borrowing rate: 1.2% per annum
90-day pound borrowing rate: 1.8% per annum…
Suppose that you are a finance manager at a U.S. based MNC. On January 1st, you anticipate you will need to purchase C170,000.00 (Canadian
dollars) worth of supplies from a Canadian supplier in March using Canadian dollars (C$). 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:…
Chapter 9 Solutions
ADVANCED ACCOUNTING
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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