Cornell Company sold some inventory to Germany, Inc., as shown below. Germany has 90 days to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Cornell Company sold some inventory to Germany, Inc., as shown below. Germany has 90 days to pay for the transaction, which was denominated in Euros. Cornell Company hedged the transaction by buying a forward contract to sell Euros in 90 days. 1) 2) 3) Sales in Euros Spot rate Forward rate to the date of payment Comell market rate Remaining term Fair Value Hedge Entries on December 1, 20X1 Entries on December 31, 20X1 Entries on February 28, 20X2 12/1/20X1 100,000 1.100 1.080 6.00% 3 12/31/20X1 1.079 1.017 . 2 2/28/20X2 1.115 1.115 Cash Flow Hedge Entries on December 1, 20X1 Entries on December 31, 20X1 Entries on February 28, 20X2 Ac Problem 1 continued Fair value hedge What is the net foreign exchange gain in 20X1? What is the balance of the forward contract at December 31, 20X1? What is the net foreign exchange loss in 20X2? What is the debit to forward contract when cash is received from the broker in 20X2 Cash flow hedge What is the amortization (or discount) expense in 20X1? What is the balance of accumulated other comprehensive income at December 31, 20X1? What is the balance of the forward contract at December 31, 20X1? What is the amortization (or discount) expense in 20X2? What is the balance of accumulated other comprehensive income at December 31, 20X2? What is the debit to forward contract when cash is received from the broker in 20X2 Cornell Company sold some inventory to Germany, Inc., as shown below. Germany has 90 days to pay for the transaction, which was denominated in Euros. Cornell Company hedged the transaction by buying a forward contract to sell Euros in 90 days. 1) 2) 3) Sales in Euros Spot rate Forward rate to the date of payment Comell market rate Remaining term Fair Value Hedge Entries on December 1, 20X1 Entries on December 31, 20X1 Entries on February 28, 20X2 12/1/20X1 100,000 1.100 1.080 6.00% 3 12/31/20X1 1.079 1.017 . 2 2/28/20X2 1.115 1.115 Cash Flow Hedge Entries on December 1, 20X1 Entries on December 31, 20X1 Entries on February 28, 20X2 Ac Problem 1 continued Fair value hedge What is the net foreign exchange gain in 20X1? What is the balance of the forward contract at December 31, 20X1? What is the net foreign exchange loss in 20X2? What is the debit to forward contract when cash is received from the broker in 20X2 Cash flow hedge What is the amortization (or discount) expense in 20X1? What is the balance of accumulated other comprehensive income at December 31, 20X1? What is the balance of the forward contract at December 31, 20X1? What is the amortization (or discount) expense in 20X2? What is the balance of accumulated other comprehensive income at December 31, 20X2? What is the debit to forward contract when cash is received from the broker in 20X2
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
The following information was taken from the annual manufacturing overhead cost budget of Fernetti Company: Variable manufacturing overhead costs..................$34,650 Fixed manufacturing overhead...
-
The following information was taken from the annual report of SC Enterprises: Required Prepare and interpret horizontal and vertical analyses of all three accounts. Round percentages to one decimal...
-
The following information was taken from the annual report of Sparky Foundation: Required Compute and interpret Sparky's receivables turnover ratio and its days-in-receivables ratio. 2012 2011 Gross...
-
a) Verify the above differential equation is not exact. b) Find an integrating factor that will make the differential equation exact. Verify your work. c) Solve the differential equation (implicit...
-
Suppose you plan to sample 10 items from a population of 100 items and would like to determine the probability of observing 4 defective items in the sample. Which probability distribution should you...
-
Use properties of the integral and the formulas in the summary to calculate the integrals. J2 xdx
-
What is the effect on output of replacing high minimum prices with grants to farmers unrelated to current production?
-
Munoz Corporation incurs the following annual fixed costs: Item Cost Depreciation .......... $ 75,000 Officers salaries ........ 160,000 Long-term lease ....... 38,000 Property taxes ......... 12,000...
-
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce...
-
Consider the following activities and their durations. The original project schedule, using early activity starts, is shown in Figure 11.20. Reconfigure the network using critical chain project...
-
The following linear trend equation was developed for annual sales (in thousand $) from 2019 to 2023, with 2019 as the base year: Sales = 680 + 60(time period). What are the estimated sales for 2024...
-
Using real-world examples, discuss the possible risks involved when a market is dominated by one or a few very large firms.
-
Using real-world examples, evaluate the view that governments should maintain strong policies to control collusive behaviour by oligopolies.
-
How would you classify each of the following industries in the USA? 1. Breakfast cereal manufacturing: 48 firms, CR, - 82.9% 2. Textile mills: 3,863 firms, CR, - 13.8% = 3. Breweries: 494 firms, CR,...
-
a) Explain why the existence of positive externalities in a market is a case of market failure. b) Using real-world examples, evaluate to what extent governments should intervene in the market for...
-
a) Explain why negative externalities of consumption are a market failure. b) Using real-world examples, evaluate policies that could be used by governments to reduce the market failure associated...
-
What industry uses the five steps in the strategic planning process? Explain
-
A circular concrete shaft liner with Youngs modulus of 3.4 million psi, Poissons ratio of 0.25, unconfined compressive strength 3,500 psi and tensile strength 350 psi is loaded to the verge of...
-
1. What principle or assumption results in the use of lower-of-cost-or-market? a. Historical cost b. Conservatism c. Going concern d. Materiality 2. Under the lower-of-cost-or-market rule, an...
-
What are the qualitative characteristics of accounting and why are they necessary to accounting information?
-
Valley Clothing Shop is a small clothing retailer now in its fourth year of business. Through its first year of operations, Valley has operated on a pure cash or check basis. Currently, Valley has...
-
Lana Priest set up a home sewing business on 1 July 2019. Usually, Lana collects $20 per hour for sewing on the completion of each days work and pays for the maintenance of her machine with cash....
-
Craigs Car Detailing Service had the following accounts and account balances in the adjusted trial balance columns of its worksheet for the year ended 30 June 2019. Required (a) Record the required...
-
The accounts below are taken from the ledger of Bartel Music Consulting on 30 June 2019, the end of the current financial year. Required (a) Record the closing entries that affected the accounts. (b)...
Study smarter with the SolutionInn App