On 4 January x1 firm C is expecting (with a very high probability) to purchase Alpine...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
On 4 January x1 firm C is expecting (with a very high probability) to purchase Alpine spruce from a European supplier. The Alpine spruce is to be used in the production of flattop acoustic guitars, and the spruce is to be delivered (and paid for) on 31 March x2 (price 180 000 €). The functional currency of firm C is US$. The purchase contract will be in €. Currency exchange rate is 1.8 €/US$. In order to safeguard itself against currency exchange risks, firm C buys a forward contract over 180 000 € (long) at an exchange rate of 1.8 USD/€. The fair value of this forward contract at 4 January x1 is nil. = Assume that the exchange rate is 2.0 €/US$ on 31 December x1 and 1.5 €/US$ on 31 March x2. Exclude the interest component in the forward (forward points). Provide the journal entries per 4 January x1, 31 December x1, and 31 March x2, assuming that firm C a) does not apply cash flow hedge accounting, b) does apply cash flow hedge accounting, assuming that the hedge is fully effective. On 4 January x1 firm C is expecting (with a very high probability) to purchase Alpine spruce from a European supplier. The Alpine spruce is to be used in the production of flattop acoustic guitars, and the spruce is to be delivered (and paid for) on 31 March x2 (price 180 000 €). The functional currency of firm C is US$. The purchase contract will be in €. Currency exchange rate is 1.8 €/US$. In order to safeguard itself against currency exchange risks, firm C buys a forward contract over 180 000 € (long) at an exchange rate of 1.8 USD/€. The fair value of this forward contract at 4 January x1 is nil. = Assume that the exchange rate is 2.0 €/US$ on 31 December x1 and 1.5 €/US$ on 31 March x2. Exclude the interest component in the forward (forward points). Provide the journal entries per 4 January x1, 31 December x1, and 31 March x2, assuming that firm C a) does not apply cash flow hedge accounting, b) does apply cash flow hedge accounting, assuming that the hedge is fully effective.
Expert Answer:
Answer rating: 100% (QA)
a 4 January x1 Purchased spruce from European supplier 180000 E 31 De... View the full answer
Related Book For
Database Systems A Practical Approach to Design Implementation and Management
ISBN: 978-0132943260
6th Edition Global
Authors: Thomas Connolly, Carolyn Begg
Posted Date:
Students also viewed these accounting questions
-
You are required to select an organization and write a paper covering certain topics from this class. A brief background of your company, including the type of business it does, how large it is,...
-
You are required to choose ONE micro, small or medium enterprise in your housing area. a) Write in your report the business profile (name, address, location, nature of business, types of business,...
-
You are required to write an abstract and title using the below information. Information - A number of case studies using data about disasters that had significant economic consequences were...
-
The homogeneous rectangular block having dimensions a-1.93, b=2.75 as shown, and mass m, rests on the inclined plane which is hinged about a horizontal axis through O. Calculate the minimum value of...
-
Gross domestic product (GDP) is a major indicator of a nation's overall economic activity. It consists of personal consumption expenditures, gross domestic investment, net exports of goods and...
-
Lowe's Companies, Inc., reports the following footnote relating to its leased facilities in its fiscal 2012 10-K report for the year ended February 1, 2013. a. Using your financial calculator or...
-
When the Concepcions went to AT&T to get a phone, they were confused as to why they were paying money for the phone when it was advertised as being free. They had to pay sales tax on the full normal...
-
Journalize the following transactions that occurred in September 2016 for Cardinal. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer...
-
You are a co-op student at Modus Biosystems and have been asked to research whether there are ways to save money on their legal liability insurance. Modus currently pays $75,000 a year for a policy...
-
Two students, Alice and Betty, are registered for a statistics class. Alice attends 80% of the time, Betty 60% of the time, and their absences are independent. On a given day, what is the probability...
-
Read the case study Bernie Madoff: How One Big Lie Can Destroy Thousands of Lives, and answer the question: In this case, it appears that Madoff had many friends and family members who were involved...
-
What is a ratio system and what does it include?
-
What is of the greatest importance in a market economy?
-
What are the general forms of financing and what do each of them compromise?
-
What are economic efficiency, efficiency and effectiveness?
-
Why are ratios so popular?
-
8. At what height is an object that has a mass of 50kg, if its gravitational potential energy is 9800J?
-
The tractor is used to lift the 150-kg load B with the 24-mlong rope, boom, and pulley system. If the tractor travels to the right at a constant speed of 4 m/s, determine the tension in the rope when...
-
Assume that you are an employee of a consultancy company that specializes in the analysis, design, and implementation of database systems. A client has recently approached your company with a view to...
-
Describe OLAP applications and identify the characteristics of such applications.
-
Discuss the main concepts of the ODMG Object Model. Give an example to illustrate each of the concepts.
-
What a difference a single outlier can make! The data set in Table 7.7 presents a collection of ordered pairs \((x, y)\). a. Using Minitab, draw a scatterplot and run a simple linear regression...
-
A plant manager wants to estimate how the number of units produced at a plant is affected by the number of employees. The data in Table 7.9 gives a random sample of the number of units produced and...
-
Can the use of social media stress you out? A researcher is interested in finding out whether college students who extensively use social media tend to have higher levels of stress. To test this, a...
Uncomplicated Forex The Step By Step Guide To Success 1st Edition - ISBN: 979-8864807613 - Free Book
Study smarter with the SolutionInn App