ABC Co. expects the value of yens to decrease in the next 30 days.Accordingly, on December 15, 20x1, ABC Co. enters into a 30-dayforward contract to sell 4,000,000 yens at the forward rate of PO.47,On December 31, 20x1, the forward rate was PO,485 and byJanuary 15, 20x2, the spot rate moved to PO.46.10) The entry to record the forward contract on December 15,20x1 includesa. a debit to forward contract for P60,000b. a credit to forward contract for P60,000c. a debit to loss on forward contract for P60,000d. none11) How much is the gain (loss) on change in fair value of thederivative on December 31, 20x1?a. 60,000 in profit or lossb. (60,0000) in OCIC. (40,000) in OCId. (60,000) in profit or loss12) The derivative asset (liability) to be included in the December31, 20x1 statement of financial position isa. 1,960,000b. (1,920,000)c. 60,0000d. (60,000)

As its name defines, a forward contract is a contract placed between parties to purchase or sale at…

Answered: Co. expects the value of yens to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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ABC Co. expects the value of yens to decrease in the next 30 days. Accordingly, on December 15, 20x1, ABC Co. enters into a 30-day forward contract to sell 4,000,000 yens at the forward rate of PO.47. On December 31, 20x1, the forward rate was PO.485 and by January 15, 20×2, the spot rate moved to PO.46. 10) The entry to record the forward contract on December 15, 20x1 includes a. a debit to forward contract for P60,000 b. a credit to forward contract for P60,000 C. a debit to loss on forward contract for P60,000 d. none 11) How much is the gain (loss) on change in fair value of the derivative on December 31, 20x1? a. 60,000 in profit or loss b. (60,0000) in OCI C. (40,000) in OCI d. (60,000) in profit or loss 12) The derivative asset (liability) to be included in the December 31, 20x1 statement of financial position is a. 1,960,000 b. (1,920,000) c. 60,0000 d. (60,000) 13) How much is the gain (loss) on change in fair value of the derivative on January 15, 20x2? a. 120,000 b.…
On December 15, 2001, star glass Co. entered into a 30-day forward contract to buy 10,000 yens at the forward rate of 1.50. 0n December 31, 2001, the forward rate was 1.25 and january 15,2002, the spot rate moved to 1.60. Provide the journal entries under each of the following scenarios: (a) the contract is settled by the actual purchase of yens; and (b) the contract is settled through net cash payment.
You sold goods for USD 2 million and expected to receive the proceeds in 2 months. You entered into a forward exchange contract (“FEC”) at AUD/USD 0.9600. You have been advised your customer cannot pay the USD 2m until 3 months after the FEC date. Your bank agrees that you can extend your FEC at the historical rate. Current spot rate is AUD/USD 0.8800 with USD and AUD interest rates 1% pa and 6% pa respectively. What is the approximate amount of AUD you will now receive at the revised future date: Select one: A. AUD 2,301,000 B. AUD 2,083,000 C. AUD 2,273,000 D. AUD 2,109,000
SorCo. Inc. has just entered into a sale agreement with a customer. The contract is for $600,000. However, the payments will be made as follows: 1 August 20X1 on date of delivery $400,000; 1 August 20X2 $100,000 and 1 August 20X3 $100,000. SorCo has estimated that the interest rate required for this customer is 8%. SorCo follows IFRS. Required: Prepare the journal entry required to record the sale on 1 August 20X1 and the receipt of cash on 1 August 20X2 and 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to the nearest whole dollar.)
Suppose that two counterparties, A and B, enter a three-month forward contract on January 1st, whereby A buys USD1 million at a forward rate of AUD/USD 1.7662. On March 1st, A decides it no longer needs to buy USD1 million on 31 March, so it enters a one-month forward contract to sell USD1 million on 31 March at a forward rate of AUD/USD 1.8000 from counterparty Calculate the net cost to counterparty A, before transaction costs.
On June 1, 2009, Benguet Manufacturing Corp. received raw materials from aforeign vendor when the spot rate is P 40.00. Payment of 100,000 foreign currency is due in 90days. On the same date, the company acquired a forward contract to buy 120,000 foreigncurrency in 90 days. The following forward rates per foreign currency were available: June 1, 90-day rate 40.30 June 30, 60-day rate40.40 July 31, 30-day rate40.10 1.What is the contract gain (loss) on hedge on an exposed position? a.(40,000) b.(30,000)c.(20,000) d.(10,000) 2. What is the exchange gain (loss) on a speculative contract in June 2009
ABC is asked to quote a price in Jamaican dollars for computer sales to a Jamaican company. The computers will be paid for in four equal, quarterly installments, beginning 90 days from now. ABC requires a minimum price of $2.5 million to accept this contract. Suppose the spot and forward rates for the J$ are as follows: Spot 90-Day 180-Day 270-Day 360-Day $0.0307 $0.0302 $0.0298 $0.0293 $0.0287 What is the minimum J$ price that ABC should quote for this order? a. J$ 87,108,014 b. J$ 82,781,457 c. J$ 84,745,763 d. J$ 81,433,225
Suppose that on June 5, a Japanese Yen future contract is purchased at the ¥ 123 per dollar (opening price). Contract is for $ 5,000. Initial margin level is 15% of the value of the contract, and maintenance level is %10 of the value of the contract. The future price is ¥ 120 per dollar on June 6. There will be 15% increase in future price on June 7 and 8% decline on June 8? What is the value of the actual margin at the end of the date June 8? (ASSUMPTION: As margin account reaches above the initial margin level, withdraw the amount above the initial margin level)
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to sell 210,000 rubles in four months (on January 31, 2018) and receive $105,000 in US dollars. Exhange rates for the ruble follow: Date Spot Rate Forward Rate October 1, 2017 $0.46 $0.51 December 31, 2017 0.49 0.52 January 31, 2018 0.51 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 forward contact as a fair value hedge of a 210,000 ruble receivable arising from a sale made on October 1, 2017. Include entries for both the sale forward contract. b. Prepare journal entries, assuming that Sharp entered into the forward contract as a fair…
RXN's year-end is on December 31. On November 1, 2019 when the U.S. dollar was worth CDNS1.365, RXN sold merchandise to an American client for US$300,000. Full payment of this invoice was expected by March 1, 2020. On December 1, the spot rate was CDNS1.3450 and the three-month forward rate was CDNS1.3250. In order to minimize its Foreign Exchange risk and exposure, RXN entered into a forward contract with its bank on December 1, 2019 to deliver US$300,000 in three months' time. The spot rate at year-end was CDNS1.36 and the forward rate from December 31, 2019 to March 1, 2020 was CDN$1.34. On March 1, 2020, RXN received the USS300,000 from its client and settled its contract with the bank. The forward contract was to be accounted for as a fair value hedge of the US dollar receivable. Significant dates and exchange rates pertaining to this transaction are as follows: Spot Rates Forward Rates November 1, 2019 (Transaction date) US$1 = CDN$1.365 December 1, 2019 (Hedged date) December…
The following information are the import transaction between Peerless Products and Tokyo Industries: On August 1, 20X1, Peerless contracts to purchase special-order goods from Tokyo Industries. Their manufacture and delivery will take place in 60 days (on October 1, 20X1). The contract price is 2,000,000 yen.. Timing USD/YEN Hedge Commencement 0.0065 30 days later (first reporting date) 0.0075 • 60 days later (purchase takes place and the payment is made) 0.0070 Required: prepare the journal entry based on the given information
On June 1 Hitch Company sold goods to a foreign customer at a price of 15,000 Foreign Currency Units Hitch will receive payment in three months on September 1st. On June 1, Hitch entered into a forward contract maturing on September 1 as a fair value hedge of its FCU receivable. Prepare all journal entries, including adjusting entries, to record the transaction and the forward contract for Hitch. Date Spot rate Forward Rate* June 1 $0.30 $0.33 June 30 $0.32 $0.32 Spet 1 $0.34 Hitch closes its books on June 30 of every year. *Forward rate is for a contract written on June 1 to mature on September 1. First, prepare entries for the sale and receivable. Then, prepare the entries for the forward contract hedge. Finally, amortize any forward premium or discount to income using OCI, other comprehensive income.

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