Myway Company sold equipment to a Canadian company for 100,000 Canadian dollars (C$) on January 1, 20X9, with settlement to be in 60 days. On the same date, Alman entered into a 60-day forward contract to sell 100,000 Canadian dollars at a forward rate of 1 C$ = $.94 in order to manage its exposed foreign currency receivable. The forward contract is not designated as a hedge. The spot rates were: January 1 (1 C$ = $0945); March 1 (1C$ = $0.930). Based on the preceding information, the entry to revalue foreign currency payable to current U.S. dollar value on March 1 will have:
A. a credit to Foreign Currency Transaction Gain for $1,500.
B. a debit to Foreign Currency Transaction Loss for $2,500.
C. a debit to Foreign Currency Transaction Loss for $1,500.
D. a credit to Foreign Currency Transaction Gain for $1,000.
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- On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows: Spot Rate Forward Rate for March 12, 20X6 December 12, 20X5 $ 0.88 $ 0.90 December 31, 20X5 0.98 0.93 1. The following information applies to Denton Incorporated’s sale of 10,000 foreign currency units under a forward contract dated November 1, 20X5, for delivery on January 31, 20X6: 11/1/X5 12/31/X5 Spot rates $ 0.80 $ 0.83 30-day forward rate 0.79 0.82 90-day forward rate 0.78 0.81 1. Denton entered into the forward contract to speculate in the foreign currency. In its income statement for the year ended December 31, 20X5, what amount of loss should Denton report from this forward contract? multiple choice $400 $300 $200 $0 2. On September 1, 20X5, Johnson Incorporated entered into a foreign exchange contract for speculative purposes by purchasing €50,000 for…arrow_forward12. On October 1, Boeing received an order from British Airways for a 747 for $200,000,000 to be paid on December 1. The exchange rates for $1 U.S. are as follows: Exchange Rates of $1 for British Pounds Spot rate, October 1 Spot rate, December 1 Forward rate, December 1 £.70 £.68 £.71 Required: If British Airways decided to hedge $150,000,000 and self insure the balance, what gain or loss would the company record on its books for the purchase of the 747? 13. On June 1, Dow Chemical purchased goods costing $140,000 from Mitsubishi in Japan. Payment for the goods is due August 1. The exchange rates for $1 U.S. are as follows: Exchange Rates of $1 for Yen ¥104 Spot rate, June 1 Forward rate, August 1 Spot rate, August 1 ¥102 ¥101 Required: If Mitsubishi decided to hedge $100,000 and self insure the balance, what gain or loss would the company record on its books for the sale to Dow Chemical?arrow_forwardCaribou River. Caribou River, Ltd., a Canadian manufacturer of raincoats, does not selectively hedge its transaction exposure. Instead, if the date of the transaction is known with certainty, all foreign currency-denominated cash flows must utilize the following mandatory forward cover formula: Caribou expects to receive multiple payments in Danish kroner over the next year. Kr3,000,000 is due in 90 days; Kr2,300,000 is due in 180 days; and Kr950,000 is due in one year. Using the following spot and forward exchange rates, what would be the amount of forward cover required by company policy for each period? What would be the Canadian dollar amount of forward cover required by company policy in 3 months? C$ (Round to the nearest cent.) Data table Data table (Click on the following icon in order to copy its contents into a spreadsheet.) (Click on the following icon in order to copy its contents into a spreadsheet.) Spot rate, Kr/C$ 4.61 Mandatory Forward Cover 0-90 days Paying the points…arrow_forward
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