On June 1, Cairns Corporation purchased goods from a foreign supplier at a price of 1,000,000 francs and will make payment in three months on September 1. On June 1, Cairns acquired an option to purchase 1,000,000 francs in three months at a strike price of $0.852. Relevant exchange rates and option premiums for the franc are as follows: Cairns

Chapter 9, Problems #34

This problem has been solved!


Do you need an answer to a question different from the above? Ask your question!
On June 1, Cairns Corporation purchased goods from a foreign supplier at a price of 1,000,000 francs and will make payment in three months on September 1. On June 1, Cairns acquired an option to purchase 1,000,000 francs in three months at a strike price of $0.852. Relevant exchange rates and option premiums for the franc are as follows:
On June 1, Cairns Corporation purchased goods from a foreign

Cairns must close its books and prepare its second-quarter financial statements on June 30.
a. Assuming that Cairns designates the foreign currency option as a cash flow hedge of a foreign currency payable, prepare journal entries for these transactions in U.S. dollars. What is the impact on net income over the two accounting periods?
b. Assuming that Cairns designates the foreign currency option as a fair value hedge of a foreign currency payable, prepare journal entries for these transactions in U.S. dollars. What is the impact on net income over the two accounting periods?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Related Book For answer-question

Advanced Accounting

13th edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni

ISBN: 978-1259444951