On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.09 per Norwegian krone, Derby enters into a forward contract to purchase 6 02,500 Norwegian kroner at a three-month forward rate of $0.10. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.098 per Norwegian krone, Derby orders and receives the merchandise, paying 602,500 kroner. The merchandise is sold within 30 days. Required: a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge. a-2. What amount should Derby Corporation report in the current year's net income as cost of goods sold? b. What amount should Derby Corporation report in the current year's net income as foreign exchange gain or loss?

Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 16,000 dinars to be received on March 1, 2021. Icebreaker enters into a forward contract on December 1, 2020, to sell 16,000 dinars on March 1, 2021. The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis. Relevant exchange rates for the dinar on various dates are as follows:   Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.40   $ 3.475   December 31, 2020   3.50     3.600   March 1, 2021   3.65     N/A       Icebreaker must close its books and prepare financial statements at December 31.   a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries for the sale and foreign currency forward contract in U.S. dollars. a-2. What is the impact on…

Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 14,000 dinars to be received on March 1, 2021. Icebreaker enters into a forward contract on December 1, 2020, to sell 14,000 dinars on March 1, 2021. The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis. 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   Icebreaker must close its books and prepare financial statements at December 31.   a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries for the sale and foreign currency forward contract in U.S. dollars. a-2. What is the impact on 2020 net income? a-3.…

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Alman Company sold pharmaceuticals to a Swedish company for 200,000 kronor (SKr) on April 20, with settlement to be in 60 days. On the same date, Alman entered into a 60-day forward contract to sell 200,000 SKr at a forward rate of 1 SKr= $0.167 in order to manage its exposed foreign currency receivable. The forward contract is not designated as a hedge. The spot rates were Mc Graw Mill 7 April 20 June 19 Required: a. Prepare all necessary entries related to the foreign transaction and the forward contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Skr 1 <-50.170 SKr 1 $0.165 View transaction list Journal entry worksheet < 1 2 Record the sales on account. 3 4 5 6 7 Note: Enter debits before credits. Note: Enter debits before credits. Date April 20 Record entry Effects on net income General Journal Clear entry Debit Credit View general journal D b. What is the effect on net income of Alman's use of the forward…

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.

On November 1, 2020, Cheng Company (a U.S.-based company) forecasts the purchase of goods from a foreign supplier for 130,000 yuan. Cheng expects to receive the goods on April 30, 2021, and make immediate payment. On November 1, 2020, Cheng enters into a six-month forward contract to buy 130,000 yuan. The company properly designates the forward contract as a cash flow hedge of a forecasted foreign currency transaction. Forward points are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis over the life of the contract. The following U.S. dollar–Yuan exchange rates apply: Date Spot Rate Forward Rate (to April 30, 2021) November 1, 2020 $ 0.24 $ 0.225 December 31, 2020 0.23 0.200 April 30, 2021 0.21 N/A As expected, Cheng receives goods from the foreign supplier on April 30, 2021, and pays 130,000 yuan immediately. Cheng sells the imported goods in the local market in May 2021. Prepare all journal entries, including…

A U.S. firm exports products to a German firm and will receive payment of €200,000 in three months. On June 1, the spot rate of the euro was $1.12, and the 3-month forward rate was $1.10. On June 1, the firm negotiated a forward contract with a bank to sell €200,000 forward in three months. The spot rate of the euro on September 1 is $1.15. the firm will receive $_______ for the euros.     224,000     230,000     220,000     200,000

On June 1, gons-care ltd (a U.S.-based company) received an order to sell goods to a foreign customer at a price of 130,000 francs. Parker-Mae will ship the goods and receive payment in three months, on September 1. On June 1, Parker-Mae purchased an option to sell 130,000 francs in three months at a strike price of $0.96. The company designated the option as a fair value hedge of a foreign currency firm commitment. The option's time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income. The fair value of the firm commitment is measured by referring to changes in the spot rate (discounting to present value is ignored). Relevant exchange rates and option premiums for the franc are as follows: Date Spot Rate Put Option Premium for September 1 (strike price $0.96) June 1 $ 0.96 $ 0.020 June 30 0.90 0.072 September 1 0.85 N/A Parker-Mae Corporation must close its books and prepare its second-quarter financial statements on June 30.…

On June 1, Parker-Mae Corporation (a U.S.-based company) received an order to sell goods to a foreign customer at a price of 165,000 francs. Parker-Mae will ship the goods and receive payment in three months, on September 1. On June 1, Parker-Mae purchased an option to sell 165,000 francs in three months at a strike price of $1.04. The company designated the option as a fair value hedge of a foreign currency firm commitment. The option's time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income. The fair value of the firm commitment is measured by referring to changes in the spot rate (discounting to present value is ignored). Relevant exchange rates and option premiums for the franc are as follows:   Date Spot Rate Put Option Premiumfor September 1(strike price $1.04)         June 1 1.04 0.020         June 30 0.98 0.072         September 1 0.93 N/A                       Parker-Mae Corporation must close its books…