Question: Problem (FV Hedge) 22 Points On December 1, 2012, ABC company invested $160,000 in 1,000 shares of XYZ co. The investment is classified as Available-for-Sale

Problem (FV Hedge) 22 Points On December 1, 2012, ABC company

Problem (FV Hedge) 22 Points On December 1, 2012, ABC company invested $160,000 in 1,000 shares of XYZ co. The investment is classified as Available-for-Sale security. Part of the investment agreement prevents the company from selling the investment before June 1, 2014. To remove uncertainty about fluctuations in the value of the investment, ABC company entered into a forward contract on December 1, 2012 with a speculator. Under the forward contract, ABC company will sell 1,000 shares of XYZ co to the speculator on June 1, 2014 for $160,000. Prepare the journal entries for ABC Co. for the following dates: 1. December 1, 2012-Investment in XYZ stock and the forward contract. 2. December 31, 2012-ABC Co. prepares financial statements. XYZ stocks are selling at $170/share 3. March 31, 2013-ABC Co. prepares financial statements. XYZ stocks are selling at $180/share 4. Prepare a PARTIAL Income Statement and a PARTIAL Balance Sheet related to the investment and the forward contract on March 31, 2013

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