Question

Kiwi Painting Company engages in a number of foreign currency transactions in euros (€). For each of the following independent transactions, determine the dollar amount to be reported in the December 31, 2004, financial statements for the items presented in the following requirements.
The relevant direct exchange rates for the euro follow:



These are the independent transactions:
1. Kiwi entered into a forward exchange contract on September 1, 2004, to be settled on February 1, 2005, to hedge a firm foreign currency commitment to purchase inventory on November 30, 2004, with payment due on February 1, 2005. The forward contract was for €20,000, the agreed-upon cost of the inventory. The derivative is designated as a fair value hedge of the firm commitment.
2. Kiwi entered into a forward exchange contract on September 1, 2004, to be settled on February 1, 2005, to hedge a forecasted purchase of inventory on November 30, 2004. The inventory was purchased on November 30 with payment due on February 1, 2005. The forward contract was for €20,000, the expected cost of the inventory. The derivative is designated as a cash flow hedge to be continued through to payment of the euro-denominated account payable.
3. Kiwi entered into a forward contract on November 30, 2004, to be settled on February 1, 2005, to manage the financial currency exposure of a euro-denominated accounts payable in the amount of €20,000 from the purchase of inventory on that date. The payable is due on February 1, 2005. The forward contract is not designated as a hedge.
4. Kiwi entered into a forward contract on September 1, 2004, to speculate on the possible changes in exchange rates between the euro and the U.S. dollar between September 1, 2004, and February 1, 2005. The forward contract is for speculation purposes and is not a hedge.

Required
Enter the dollar amount that would be shown for each of the following items as of December 31, 2004. Compute the statement amounts net. For example, if the transaction generated both a foreign currency exchange gain and a loss, specify just the net amount that would be reported in the financial statements. If no amount would be reported for an item, enter NA for Not Applicable in thespace.


$1.99
Sales0
Views75
Comments0
  • CreatedMay 23, 2014
  • Files Included
Post your question
5000