Townshend Company sold guitars to The Who Inc. for £250,000 on September 21, 2020. The collection of payment from The Who, Inc. is dueon December 19, 2020.Additionally, on September 21, Townshend entered into a 90-day forward contract to sell £250,000 at a rate of £1 = $1.23. The forwardcontract was entered into to manage the exposed net asset position in UK Pounds, but it was not designated as a hedge. The spot rates were:09/21/20£1 = $1.2112/20/20£1 = $1.24Looking back on the entire situation (i.e., the original transaction and the forward contract) in terms of the US$ needed to settle bothtransactions, did entering the forward contract work out well for Townshend Company?A)Yes. Without the forward contract, the company would have received fewer US$ when selling the pounds on the settlement date.

Forward rate is the rate fixed today for the transaction price which is to be paid or received at a…

Looking back on the entire situation (i.e., the original transaction and the forward contract) in terms of the US$ needed to settle both transactions, did entering the forward contract work out well for Townshend Company?

Looking back on the entire situation (i.e., the original transaction and the forward contract) in terms of the US$ needed to settle both transactions, did entering the forward contract work out well for Townshend Company?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On October 1, 2021, A Corp. purchased goods from US based corporation worth 60,500 US dollars. Payment is due in 120 days on January 30, 2022. In view of the transaction, Active Corp. entered into a forward contract to buy 60,500 US dollars from PNB in 120 days. The relevant rates are as follows: 10/01/21 12/31/21 01/30/22 Spot rate P 53 P 55 P 53.50 Forward rate 54 56.50 55How much is the net forex loss on settlement date?
In 2020, HP Company transferred goods to a retailer on consignment. The goods cost P450,000 and normally are sold at a 40% markup on cost. GGG paid P5,000 for the cost of the shipment while the retailer paid P3,800 for advertising and P2,800 for the cost of freight out. The parties agreed that GGG would reimburse the cost of advertising and freight paid by the retailer. In 2020, the retailer at the normal markup, sold 80% of the merchandise and the balance of the merchandise was returned to AAA and paid a freight of P2,500. The retailer withheld 15% commission from payment plus the amount reimbursable by the consignor. How much is the consignment net income?
On July 1, 2021, LIBAGO Company sold a machine costing P500,000 with accumulated depreciation of P380,000 on the date of sale. LIBAGO received as consideration for the sale, a P300,000 non-interest bearing note, due July 1, 2024. There was no established exchange price for the equipment and the note had no ready market. The prevailing rate of interest for a note of this type at July 1, 2021 was 12% and 13% on December 31, 2021. 37. In relation to this transaction, the total income to be recognized in LIBAGO’s 2021 profit or loss is:
On 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.
On July 2021, Publicus sold a machine to a customer for £500,000 (excluding value added tax), and the customer paid in full when the machine was delivered on that date. In addition to the machine, Publicus agreed to provide maintenance for thirty months ending on 31 December 2023. Publicus has allocated E446,000 of the transaction price to the machine and g54,000 to the maintenance agreement. How much revenue should Publicus recognise from this sale in its income statement for the year to 31 December 2021? a. £467,600 b. £500,000 c. £456,800 d. £446,000
On January 1, 2022, J Company acquired an intangible asset from a foreign company. The invoice price of the intangible was P5,000,000 subject to a 10% discount if acquired on a cash basis. J Company paid P500,000 import duties and professional fees of P50,000 in relation to its acquisition. At what amount should the intangible asset be initially recorded in the books of J Company? NOTE: ANSWER ONLY
Hizon Holdings Inc. a parent company of a group of companies, but also does its own trading. It bought a fixed assets for $36,000 on November 1, 2019 when the exchange rate was $1 = P23. At December 31, 2019, the company's year-end, the supplier of the fixed asset has not been paid and the exchange rate at that time was $1.00 = P25. The company has not taken out forward exchange contract for this payment as a hedge against adverse exchange rate movements. On the balance sheet date of HIzon Holdings Inc, what will be the values for the fixed assets and the creditor who was unpaid? Group of answer choices a. Fixed Asset - P828,000; Creditor - P900,000 b. Fixed asset - P900,000; Creditor - P900,000 c. Fixed asset - P828,000; Creditor - P828,000 d. Fixed asset - P900,000; Creditor - P828,000
November 1, 2020, Sapelo Co. (U.S. manufacturer) sold an aircraft for 1 million New Zealand Dollars (NZ$) to a New Zealand company, Waiheke Corp. Sapelo Co. will receive payment on January 30, 2021 in New Zealand Dollars. To protect the position/value of its receivables, Sapelo Co. entered into a 90-day forward contract on November 1, 2020 to sell 1 million New Zealand Dollars. On November 1, 2020, the forward rate was US$0.79 per New Zealand Dollar. This forward contract applies net settlement and is a fair value hedge. Ignore the time value of money. Relevant exchange rate per New Zealand Dollar: 1 November 202031 Desember 2020 30 Januari 2021 Spot Rate US$0,79 US$0,75 US$0,73 Forward Rate untuk 30/1/’21 US$0,79 US$0,76 US$0,73 Make journal entries to be recorded by Sapelo Co. on November 1, 2020, December 31, 2020, and January 30, 2021. December 31 is the end of the fiscal year.
On January 1, 2021, Enigma Company sold an equipment costing P500,000 which had a carrying amount of P350,000, receiving a P125,000 down payment and, as additional consideration, a P400,000 noninterest bearing note due on January 1, 2024. There was no established exchange price for the equipment, and the note had no ready market. The prevailing rate of interest for a note of this type at January 1, 2021 was 12%. The present value of 1 at 12% for three periods is 0.7118. Required: Prepare journal entries for 2021, 2022, 2023 and 2024.
On July 1, 2019, Optimistic Company sold a machine costing P500,000 with accumulated depreciation of P380,000. On the date of sale, Optimistic received as consideration for the sale, a P300,000 noninterest-bearing note, due July 1, 2022. There was no established exchange price for the equipment and the note had no ready market. The prevailing rate of interest for a note of this type at July 1, 2019 was 12% and 13% on December 31, 2019. In relation to this transaction, what is the total income to be recognized in Optimistic’s 2019 statement of comprehensive income? (Round PVF to 4 decimals) P119,165 P180,000 P101,445 P106,352
On January 01, 2021, The Company sold equipment costing P760,000 with accumulated depreciation of P320,000 on the date of sale. Company received as consideration for the sale, a P800,000 noninterest-bearing note due January 1, 2025. There was no established exchange price for the equipment and the note had no ready market. The prevailing rate of interest for a note of this type on January 01, 2021 was 5%. Using two decimal places for the present value (PV) factor, what is the note’s carrying amount on December 31, 2021?
On January 1, 2020, Laguna Company sold equipment costing P836,000 with accumulated depreciation of P352,000 on the date of sale. Laguna received as consideration for the sale, a P880,000 noninterest-bearing note due January 1, 2023. There was no established exchange price for the equipment and the note had no ready market. The prevailing rate of interest for a note of this type at January 1, 2020 was 10%. The present value of 1 at 10% for three periods is 0.75. In Laguna Company's statement of comprehensive income, how much should be reported as interest income for 2020?

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