On November 15, 2018, our company purchased a foreign-currency-denominated AFS debt securit 250,000. Our company plans...
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On November 15, 2018, our company purchased a foreign-currency-denominated AFS debt securit €250,000. Our company plans to sell the security in three months (i.e., on February 15). The spor on the date the security is purchased is $1.36:€1 and the company is concerned about the prospected a strengthening $US that will reduce the SUS fair value of the foreign-currency-denominated securie To hedge this risk, the company purchases a forward contract to sell €250,000 for $1.34:€1 (the rent forward rate) on February 15, 2019. Our U.S.-based company's functional currency is the SUS The spot and forward exchange rates and their effects on the recorded values of AFS security and the forward-contract derivative are summarized in the following table: FC AFC Security Derivative-Forward Forward Rate Spot Rate (SUS = €1) Carrying Value Change in Carry Val. FV Asset Change in FV Date (SUS = €1) (Liability) November 15, 2018... December 31, 2018. February 15, 2019 $340,000 325,000 320,000 1.36 1.34 1.32 1.30 $(15,000) (5,000) $ 5,000 15,000 $ 5,000 10,000 1.28 1.28 .... For settlement on February 15, 2019 Ignore discounting in the computation of fair values. a. Prepare the journal entries to record the purchase and all adjustments required for the AFS secumy and the forward contract at November 15, 2018, December 31, 2018, and February 15, 2019. b. Reconcile to the forward rate at the forward contract's inception the net cash received for bou a sale of the AFS security and the settlement of the forward-contract derivative. On November 15, 2018, our company purchased a foreign-currency-denominated AFS debt securit €250,000. Our company plans to sell the security in three months (i.e., on February 15). The spor on the date the security is purchased is $1.36:€1 and the company is concerned about the prospected a strengthening $US that will reduce the SUS fair value of the foreign-currency-denominated securie To hedge this risk, the company purchases a forward contract to sell €250,000 for $1.34:€1 (the rent forward rate) on February 15, 2019. Our U.S.-based company's functional currency is the SUS The spot and forward exchange rates and their effects on the recorded values of AFS security and the forward-contract derivative are summarized in the following table: FC AFC Security Derivative-Forward Forward Rate Spot Rate (SUS = €1) Carrying Value Change in Carry Val. FV Asset Change in FV Date (SUS = €1) (Liability) November 15, 2018... December 31, 2018. February 15, 2019 $340,000 325,000 320,000 1.36 1.34 1.32 1.30 $(15,000) (5,000) $ 5,000 15,000 $ 5,000 10,000 1.28 1.28 .... For settlement on February 15, 2019 Ignore discounting in the computation of fair values. a. Prepare the journal entries to record the purchase and all adjustments required for the AFS secumy and the forward contract at November 15, 2018, December 31, 2018, and February 15, 2019. b. Reconcile to the forward rate at the forward contract's inception the net cash received for bou a sale of the AFS security and the settlement of the forward-contract derivative.
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vilblefrsle FS is n unting term used t desribe nd lssify finnil ssets It is debt r equity seurity nt lssified s heldfrtrding r heldtmturity seuritythe ... View the full answer
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