Shandra Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price...
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Shandra Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 105,000 pounds, with delivery and payment to be made on June 15. On April 15, when the spot rate is $1.39 per pound, Shandra purchases a two-month call option on 105,000 pounds and designates this option as a cash flow hedge of a forecasted foreign currency transaction. The time value of the option is excluded in assessing hedge effectiveness; the change in time value is recognized in net income over the life of the option. The option has a strike price of $1.39 per pound and costs $1,050. The goods are received and paid for on June 15. Shandra sells the Imported goods in the local market Immediately. The spot rate for pounds is $1.440 on June 15. Required: a-1. Prepare all journal entries for Shandra Corporation related to this transaction and hedge. a-2. What amount should Shandra Corporation report in net income as cost of goods sold for the quarter ending June 30? b. What amount should Shandra Corporation report in net income as foreign exchange gain or loss for the quarter ending June 30? Req A1 Req A2 Req B What amount should Shandra Corporation report in net income as cost of goods sold for the quarter ending June 30? Cost of goods sold < Req A1 Req B > Req A1 Req A2 Req B 30? What amount should Shandra Corporation report in net income as foreign exchange gain or loss for the quarter ending June Note: Select "No effect" if there is no foreign currency gain or loss. < Req A2 Req B > Shandra Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 105,000 pounds, with delivery and payment to be made on June 15. On April 15, when the spot rate is $1.39 per pound, Shandra purchases a two-month call option on 105,000 pounds and designates this option as a cash flow hedge of a forecasted foreign currency transaction. The time value of the option is excluded in assessing hedge effectiveness; the change in time value is recognized in net income over the life of the option. The option has a strike price of $1.39 per pound and costs $1,050. The goods are received and paid for on June 15. Shandra sells the Imported goods in the local market Immediately. The spot rate for pounds is $1.440 on June 15. Required: a-1. Prepare all journal entries for Shandra Corporation related to this transaction and hedge. a-2. What amount should Shandra Corporation report in net income as cost of goods sold for the quarter ending June 30? b. What amount should Shandra Corporation report in net income as foreign exchange gain or loss for the quarter ending June 30? Req A1 Req A2 Req B What amount should Shandra Corporation report in net income as cost of goods sold for the quarter ending June 30? Cost of goods sold < Req A1 Req B > Req A1 Req A2 Req B 30? What amount should Shandra Corporation report in net income as foreign exchange gain or loss for the quarter ending June Note: Select "No effect" if there is no foreign currency gain or loss. < Req A2 Req B >
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Transaction Details 1 Shandra Corporation plans to order goods from a foreign supplier priced at 105... View the full answer
Related Book For
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Posted Date:
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