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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Textbook Question
Chapter 9, Problem 41P
Based on past experience, Leickner Company expects to purchase raw materials from a foreign supplier at a cost of 1,000,000 marks on March 15, 2018. To hedge this
- a. Prepare all
journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials, assuming that December 31 is Leickner’s year-end and that the raw materials are included in the cost of goods sold in 2018. - b. What is the overall impact on net income over the two accounting periods?
- c. What is the net
cash outflow to acquire the raw materials?
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Excel Template(Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you’ve been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.)
Moonview Company uses approximately 200,000 units of raw material in its manufacturing operations.
On December 1, 2021, the entity purchased a call option to buy 200,000 units of the raw material on July 1, 2022 at a strike price of ₱25 per unit.
The entity paid ₱20,000 for the call option. The entity designated the call option as a cash flow hedge against price fluctuation for its July purchase.
The market price of the raw materials is ₱28 on December 31, 2021 and ₱21 on July 1, 2022.
1. What is the derivative asset on December 31, 2021?a. 600,000b. 580,000c. 20,000d. 0
2. What is the derivative liability on July 1, 2022?a. 800,000b. 400,000c. 780,000d. 0
3. What is the cost of purchases on July 1, 2022?a. 5,000,000b. 4,980,000c. 4,200,000d. 4,220,000
Chapter 9 Solutions
LooseLeaf for Advanced Accounting (Irwin Accounting) - Standalone book
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