The entity sold its inventory to a foreign entity with credit term of n/60. On the 60th day from invoice, the entity accepted the $200 payment from a client. It converted this amount on the spot rate. The entity's approach to the foreign exchange risk is  A. Avoidance B. Mitigation C. Acceptance

Question 4a) Differentiate between the different types of foreign exchange exposure that multinationalcompanies usually face when engaging in cross-border transactions b) Assume that the one-year interest rate is 3% (per annum) in the UK and 2% (per annum)in the Euro area. Also, assume that the current spot exchange rate of one pound to the eurois €1.1500/£ and that the corresponding one-year forward rate is €1.1400/£. i) Provide calculations to show whether the Interest Rate Parity (IRP) theory holds. ii) A UK-based investor has £200,000 to invest for a year either in the Euro area or the UK.Using the above information, determine which investment will generate a higher return for iii) Discuss the extent to which your results in i) and ii) above provide support to theCovered Interest Rate Parity (CIRP) condition.

A3

Dd5.

Accounting records of Company C are expressed in EUR. On 30 April 20XX, it sells goods to a foreign company that requests the amount of the sale to be expressed in USD. No VAT to be charged. When the invoice is sent to the client for an amount of USD 1.000, the exchange rate EUR / USD is 1. On 31 May 20XX, the client paid the invoice in USD on the EUR bank account so that the amount in USD is immediately converted into EUR at the current exchange rate. The current exchange rate is 1EUR = 1,10 USD. Prepare the accounting journal entries for the sale and the repayment.

Hull Manufacturing Corp. (HMC), a Canadian company, manufactures instruments used to measure the moisture content of barley and wheat. The company sells primarily to the domestic market, but in Year 3, it developed a small market in Argentina. In Year 4, HMC began purchasing semi-finished components from a supplier in Romania. The management of HMC is concerned about the possible adverse effects of foreign exchange fluctuations. To deal with this matter, all of. HMC's foreign-currency-denominated receivables and payables are hedged with contracts with the company's bank. The year-end of HMC is December 31. The following transactions occurred late in Year 4: • On October 15, Year 4, HMC purchased components from its Romanian supplier for 807,000 Romanian leus (RL). On the same day, HMC entered into a forward contract for RON807,000 at the 60-day forward rate of RON1 = $0.415. The Romanian supplier was paid in full on December 15, Year 4. • On December 1, Year 4, HMC made a shipment to a…

"When a company uses put options to hedge foreign currency firm commitments, the accounting is relatively simple. The company records the cost of the option as an expense on its income statement. Then, when the contract expires, any difference between the strike price and the actual market price is recorded as a gain or loss on the income statement." Can you please illustrate the statement with an example of when the contract falls between two fiscal years?

Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 276,000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare journal entries to account for the import purchase and foreign currency forward contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)   Record the foreign exchange loss for the third quarter.

Prepare a second consolidated balance sheet for the MNE using the exchange rates you expect in the future. Determine how any reporting currency imbalance will affect the new consolidated balance sheet for the MNE. a) Prepare a transaction exposure report for Sundance and its affiliates. Determine if any transactions exposures are also translation exposures. b) Investigate what Sundance and its affiliates can do to control its transaction and translation exposures. Determine if any of the translation exposure should be hedged. Please provide excel formulas and screenshots