a. Assume that Spindler acquired the surfboards on September 1, 2020, and made payment on December 1, 2020. What is the effect of the exchange rate fluctuations on reported income in 2020? b. Assume that Spindler acquired the surfboards on December 1, 2020, and made payment on March 1, 2021. What is the effect of the exchange rate fluctuations on reported income in 2020 and 2021? c. Assume that Spindler acquired the surfboards on September 1, 2020, and made payment on March 1, 2021. What is the effect of the exchange rate fluctuations on reported income in 2020 and in 2021?
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- Spindler, Inc. (a U.S.-based company), imports surfboards from a supplier in Brazil and sells them in the United States. Purchases are denominated in terms of the Brazilian real (BRL). During 2020, Spindler acquires 300 surfboards at a price of BRL 1,600 per surfboard, for a total of BRL 480,000.00. Spindler will pay for the surfboards when it sells them. Relevant exchange rates are as follows: Date U.S. Dollar perBrazilian Real (BRL) September 1, 2020 $ 0.240 December 1, 2020 0.230 December 31, 2020 0.250 March 1, 2021 0.235 Assume that Spindler acquired the surfboards on September 1, 2020, and made payment on December 1, 2020. What is the effect of the exchange rate fluctuations on reported income in 2020? Assume that Spindler acquired the surfboards on December 1, 2020, and made payment on March 1, 2021. What is the effect of the exchange rate fluctuations on reported income in 2020 and 2021? Assume that Spindler acquired the surfboards on…Spindler, Inc. (a U.S.-based company), imports surfboards from a supplier in Brazil and sells them in the United States. Purchases are denominated in terms of the Brazilian real (BRL). During 2020, Spindler acquires 320 surfboards at a price of BRL 1,600 per surfboard, for a total of BRL 512,000.00. Spindler will pay for the surfboards when it sells them. Relevant exchange rates are as follows: Date U.S. Dollar perBrazilian Real (BRL) September 1, 2020 $ 0.220 December 1, 2020 0.210 December 31, 2020 0.230 March 1, 2021 0.215 Assume that Spindler acquired the surfboards on September 1, 2020, and made payment on December 1, 2020. What is the effect of the exchange rate fluctuations on reported income in 2020? Assume that Spindler acquired the surfboards on December 1, 2020, and made payment on March 1, 2021. What is the effect of the exchange rate fluctuations on reported income in 2020 and 2021? Assume that Spindler acquired the surfboards on…Spindler, Incorporated (a U.S.-based company), imports surfboards from a supplier in Brazil and sells them in the United States. Purchases are denominated in terms of the Brazilian real (BRL). During 2023, Spindler acquires 280 surfboards at a price of BRL 1,600 per surfboard, for a total of BRL 448,000. Spindler will pay for the surfboards when it sells them. Relevant exchange rates are as follows: Date September 1, 2023 December 1, 2023 December 31, 2023 March 1, 2024 U.S. Dollar per Brazilian Real (BRL) $ 0.210 0.200 0.220 0.205 Required: a. Assume that Spindler acquired the surfboards on September 1, 2023, and made payment on December 1, 2023. What is the effect of the exchange rate fluctuations on reported income in 2023? b. Assume that Spindler acquired the surfboards on December 1, 2023, and made payment on March 1, 2024. What is the effect of the exchange rate fluctuations on reported income in 2023 and 2024? c. Assume that Spindler acquired the surfboards on September 1, 2023,…
- Jackson, a U.S. company, acquires a variety of raw materials from foreign vendors with amounts payable in foreign currency (FC). The company needs to acquire 20,000 units of raw materials, and the goods are expected to have a price of 100,000 FC. Assume that the inventory can be subsequently sold to U.S. customers for $160,000. Jackson is contemplating committing to the purchase of the inventory on September 1 with delivery on November 1. However, rather than making a commitment, the company could forecast a probable purchase of inventory with delivery on November 1. In either case, assume that on September 1 the company would either (a) acquire a forward contract to buy 100,000 FC with a forward date of November 1 or (b) acquire an option to buy FC in November at a strike price of $1.250. The option premium is expected to cost $2,100.Various spot rates, forward rates, and option values are as follows: Spot Rate Forward Rate forNovember 1 Time Value ofOption September 1 . . . .…Max Ltd sells equipment to Star Ltd, a U.S. company on 30/01/2020 for US$250,000. Goods are invoiced in US dollars. Payment is made on 5/03/2020. The company also buys parts from the USA, also invoiced in US$, value US$187,500 on 20/4/2020. The functional currency of Max Ltd is AUD$. As at 30/06/2020, this debt unpaid. Rates: 30/01 – A$1 = US$0.93 5/03 – A$1 = US$0.92 20/4 – A$1 = US$0.94 30/6 – A$1 = US$0.91 Required: SHOW YOUR WORKINGS Prepare journal entries for the above transactions. (Round answers to the nearest dollar, e.g. $200,263.57 = $200,264).The Sohar Port Corporation purchased 100 Photocopier machines from a German supplier at the unit price of EUR 5,000 on November 25, 2020. The cost of equipment is EUR 3,500 per unit. According to the Purchase Agreement, payment was due on February 25, 2021. Sohar Port Corporation paid the debt in full on the settlement date. Sohar Port Corporation is a legal entity based in the Sultanate of Oman and prepares its Financial statements in OMR for the financial year ending on December 31. The information on spot exchange rates is given below: Date Exchange rate Transaction date November 25, 2020 EUR 1 = OMR 0.417 Balance sheet date December 31, 2020 EUR 1 = OMR 0.470 Settlement date February 25, 2021 EUR 1 = OMR 0.451 Required: A. Journalize the purchase of the equipment and the payment. B. Calculate and analyze the overall effect of the changes in the foreign currency exchange rates on this transaction.
- Maplewood Inc. sells lumber to a number of clients around the world. On December 1, 2020 the company shipped some lumber to a client in the U.S. The selling price was established at US$600,000 with payment to be received on March 1, 2021. On December 3, 2020 Maplewood Inc. entered into a hedge by way of a forward contract with a Canadian Bank at the 90-day forward rate of US$1 = CDN$1.275. Hedge accounting is not applied. Maplewood Inc. received the payment from its American client on March 1, 2021. The company's year-end is on December 31. The two-month forward rate for US dollars was CDN$1.255 on that date. Selected spot rates were as follows: December 1, 2020: US$1 = CDN$1.2355 December 3, 2020: US$1 = CDN$1.2355 December 31, 2020: US$1 = CDN$1.2455 March 1, 2021: US$1 = CDN$1.2480 Required: Part a) Prepare a partial Balance Sheet for Maplewood Inc. on December 31, 2020. Part b) Prepare the journal entries on March 1, 2021.Question: What is the impact on 2020 net income? Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 14,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 14,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.20 $ 3.275 December 31, 2020 3.30 3.400 March 1, 2021 3.45 N/A Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable.Fergusson Corporation, a U.S. company, manufactures components for the automobile industry. In the past, Fergusson purchased actuators used in its products from a supplier in the United States. The company plans to shift its purchases to a supplier in Portugal. Fergusson's CFO expects to place an order with the Portuguese supplier in the amount of 200,000 euros in three months. In contemplation of this future import, the CFO purchased a euro call option to hedge the cash flow risk that the euro appreciate against the U.S. dollar over the next three months. The CFO is aware that a foreign currency option used to hedge the cash flow risk associated with a forecasted foreign currency transaction may be designated as a hedge for accounting purposes only if the forecasted transaction is probable. However, he is unsure how he should demonstrate that the anticipated import purchase from Portugal is likely to occur. He wonders whether management's intention to make the purchase is…
- Local Corp imported a heavy machine from the US for US$50,000 on October 10, 2019. A letter of credit was opened with a Makati branch based on the commercial invoice for US$50,000, on which Local Corpl made a 100% deposit cover based on the exchange rate of $1.00 to P27.50. Shipment of the heavy machine was effected on December 30, 2019, at which time the exporter collected the proceeds of the letter of credit when the prevailing exchange rate was $1.00 to P28.00. From the exchange rate fluctuation, Local Corp realized: Group of answer choices A. P25,000 gain B.P25,000 loss C. P5,000 gain D. No gain, No lossOn September 30, 2020, Chicken Ltd., a Canadian company, entered into a contract to purchase goodsfrom Wing Ltd., a foreign corporation. The terms of the contract call for the goods to be delivered toChicken Ltd.'s Edmonton location on May 30, 2021. The cost of goods is EUR $1,000,000 to be settled onJuly 31, 2021. On September 30, 2020, Chicken Ltd. also arranged for a forward contract through its bank for EUR$1,000,000. The goods were delivered on time, and Chicken Ltd, settled with Wing Ltd. on July 31, 2021.Chicken Ltd. has a April 30 year-end.The spot and forward rates are as follows: Spot Rate ($CAD)1 USD = x.xX CAD Forward Rate($CAD)1 USD = XXX CAD September 30, 2020 $1.42 $1.46 April 30, 2021 $1.44 $1.48 May 30, 2021 $1.45 $1.49 July 31, 2021 $1.50 $1.50 RequiredPrepare Chicken Ltd.'s journal entries to reflect the above assuming that:a. the hedge is a cash flow hedge, andb. the hedge is a fair value hedge.Apex Ltd, is a computer software manufacturing company based in the United States of America (USA). On 1st January 2019, it sold goods worth K10,000.00 to Electro Computers, a company based in Zambia. Electro computers Ltd paid for the software in June 2019. The prevailing exchange rates were:January 2019: K12:00 : US $ 1.00June 2019: K12:30 : US $ 1.00Required:Show how the necessary accounting entries for the transaction will be reflected in the books of each company.