Question: A U.S. company estimated that, in the first two months of 2010, its export sales to a Swiss company would generate 400,000 francs. On December

A U.S. company estimated that, in the first two months of 2010, its export sales to a Swiss company would generate 400,000 francs. On December 1, 2009, in an effort to protect against the weakening franc, the company purchased an option (out of the money) to sell 400,000 Swiss francs at an exchange rate of $0.60 with an expiration date of February 25, 2010. The cost of the option was $6,000. The spot rates on the following dates were:

December 1, 2009$0.62

December 31, 2009$0.60

February 25, 2010 $0.57

The option's value in the options market on December 31, 2009, was $9,000. December 31 is also an interim reporting date. The option was exercised on February 25, 2006.

Required:

Prepare all journal entries needed on December 1, December 31, and February 25 to account for the option.

Step by Step Solution

★★★★★

3.32 Rating (167 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

December 1 2009 1 Option to sell Francs 6000 Cash 6000 December 31 2009 2 Option to sell Francs 3000 ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

417-B-A-G-F-A (6252).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

A U.S. company estimated that, in the first two months of 2016, its export sales to a Swiss company would generate 400,000 francs. On December 1, 2020, in an effort to protect against the weakening...

In the first two chapters, we have discussed financing, investing, and operating activities in the business cycle (or statement of cash flows). Identify one example of a financing activity that would...

An article in the Economist noted that in the first half of 2015, the value of Canadian oil exports declined and that "energy firms, which account for around a third of capital spending, are expected...

I only need help with the account that's highlighted red in the picture. I chose Investment in FC but it was wrong. Which account should it be? Thank you. A U.S. company estimated that, in the first...

A U.S. company estimated that, in the first two months of 2026, its export sales to a Swiss company would generate 389,000 francs. On December 1, 2025, in an effort to protect against the weakening...

A U.S. company estimated that, in the first two months of 2026, its export sales to a Swiss company would generate 400,000 francs. On December 1, 2025, in an effort to protect against the weakening...

A u.s company estimated that in the first two months of 2026 its export sales to Swiss company would generate 410,000 francs. On December 1, 2025 in an effort to protect against weakening franc the...

A U.S. company estimated that, in the first two months of 2026, its export sales to a Swiss company would generate 428,000 francs. On December 1, 2025, in an effort to protect against the weakening...

A U.S. company estimated that, in the first two months of 2026 , its export sales to a Swiss company would generate 375,000 francs. On December 1, 2025, in an effort to protect against the weakening...

A U.S. company estimated that, in the first two months of 2026, its export sales to a Swiss company would generate 375,000 francs. On December 1, 2025, in an effort to protect against the weakening...

Answer each of the following questions. a. $60 is 30% of what amount? b. $36 is what percent of $15? c. What is 0.1% of $3600? d. 150% of what amount is $270? e. 1% of $612 is what amount?

Medtronics is a world leader in medical technology. The following selected data are adapted from a recent annual report. (Dollar amounts are stated in millions.) The company has long-term liabilities...

Which function has a horizontal asymptote a t y = - 2 ? A . y = - 2 x - 6 - x - 3 B . y = - 2 x - 3 2 x 2 + 3 C . y = - 2 x 2 - 1 2 x D . y = - 2 x - 6 x + 3

How do you see the futuristic outlook of Pakistan?

The circuit above shows an active high-pass filter. a) Find the transfer function H(jw) =Vo/Vs. (Tip: One can use reverse voltage division to find Vo) Answer a: H(ja) == jw(R,+R2) ju8+1+5-w? b) It is...

Verilog is one of the ways to model hardware using a .description programming language :Select one True False

Which of the following is a user defined :primitive? Select one .a or .b and .c none of the options .d display$ .e not

Determine the moment of inertia with respect to the y-axis for the area shown ( Figure 2 ). The dimension is a = 2.00 m. Note: Please include the appropriate unit and express answer in 3 sign figs. y...

A code of ethics states, It is our duty to make decisions and act impartially and objectively. Our conduct must be free from competing self-interest, prejudice, and favoritism. This concept is a part...

Criticize the following statement: Exchange losses arise from foreign import activities, and exchange gains arise from foreign export activities.

When are exchange gains and losses reflected in a businesss financial statements?

Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash Flow 0 $ 38,500,000 1 58,500,000 2 13,500,000 Compute the IRRs for this project. (Do not...

S&P Corp(SPC's) optimal capital structure consists of 40 percent debt and 60 percent equity. Given the following information, calculate the marginal cost of capital(MCC) schedule and the optimal...

The expected return on Big Time Toys is 1 2 percent and its standard deviation is 1 9 percent. The expected return on Chemical Industries is 9 percent and its standard deviation is 1 9 percent....