FREE Trial

Wil has 100,000 units of widgets in its inventory on October 1, 2016. Wil purchased them for $1 per unit one month ago. It hedges the value of the widgets by entering into a forward contract to sell 100,000 widgets

Wil has 100,000 units of widgets in its inventory on October 1, 2016. Wil purchased them for $1 per unit one month ago. It hedges the value of the widgets by entering into a forward contract to sell 100,000 widgets on January 31, 2017, for $2 each. The contract is to be settled net. Assume that a discount rate of 6 percent is reasonable.

Prepare the journal entries to properly account for this hedge of an existing asset on the following dates:

1. October 1, 2016, when the widget price is $1.50

2. December 31, 2016, when the widget price is $2.50

3. January 31, 2017, when the widget price is $2.30

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...

This problem has been solved!


Do you need an answer to a question different from the above? Ask your question!
  • Tutor Answer

October 1 2016 1 Forward contractA 49012 Gain on forward contract 49012 100000 x 200 1…View the full answer


answer-question
Related Book For  answer-question
Advanced Accounting

Advanced Accounting

ISBN: 978-0134472140

13th edition

Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith

See More Books
Question Details
Chapter # 13
Section: Exercises
Problem: 4
Posted Date: February 28, 2017 12:12:09
See More Questions

Students also viewed these Cost Accounting questions

Q:
Assume that Suffolk Co. negotiated a forward contract to purchase 200,000 British pounds in 90 days. The 90-day forward rate was $1.40 per British pound. The pounds to be purchased were to be used to...
A:
The US dollars paid when hedging 140200000 280000 The dollars p......
Q:
Assuming that MNC entered into a forward contract to sell 10 million South Korean won on December 1, 2011, as a fair value hedge of a foreign currency receivable, what is the net impact on its net...
A:
B The nominal value of the forward contract on December 31 2011......
Q:
Assuming that MNC entered into a forward contract to sell 10 million South Korean won on December 1, 2013, as a fair value hedge of a foreign currency receivable, what is the net impact on its net...
A:
B 5880 decrease in net income The nominal value of the forward cont......
Q:
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: What is the Sharpe ratio, Treynor ratio, and Jensens alpha for eachportfolio?...
A:
Portfolio Sharpe ratio Tre......
Q:
The City of Evansville operated a summer camp program for at-risk youth. Businesses and nonprofit organizations sponsor one or more youth by paying the registration fee for program participants. The...
A:
Part A City of Evansville Summer Camp Enterprise Fund GENERAL JOURNAL fiscal year 2012 Debits Credits 1Cash Operating RevenuesCharges for services 127......
Q:
Washington Theater System entered into a three-year agreement with a local civic organization such that the organization would provide 5,000 of its patrons each month with a special ticket to attend...
A:
What Is Variable and stuck Cost in Accounting Fixed costs are predetermined expenses that remain the identical throughout a selected period These over......
Q:
No flying reindeer are animals who get lost in the fog. Therefore, it is false that all flying reindeer are animals who get lost in the fog. Use the traditional square of opposition to determine...
A:
Click to View...
Q:
The Eatery is a restaurant in DeKalb, Illinois. It specializes in deluxe sandwiches in a moderate price range. Michael Raye, the manager of The Eatery, has determined that during the last 2 years the...
A:
a Sales Mix Percentage X Contribution Margin Ratio WeightedAverage Contribution Margin Ratio Appetizers Main entrees Desserts Beverages 15 60 10 15 X......
Q:
You are the underwriter for a local bank. You are reviewing a borrower's loan application for a new $400,000 residential mortgage loan. The interest rate is 3% per year and the amortization period is...
A:
The 1st underwriting ratio often referred to as the frontend ratio or housing expense ratio is a mea......
Q:
Sandford Inc. manufactures lawn mowers and garden tractors. Lawn mowers are relatively simple to produce and are made in large quantities. Garden tractors are customized to individual wholesale...
A:
a Overhead rate 3960000 330000 units 12 per unit Mowers Tractors Total Revenue 19500000 17850000 37350000 Less Direct material 4000000 2700000 6700000......
Q:
Brk signs a firm sales commitment with Riv. The contract is to sell 100,000 widgets deliverable in three months, on January 31, 2017, at the prevailing market price of widgets at that date. On...
A:
1 November 1 2016 Memorandum entry only December 31 2016 2 Forward Contract A 49751 Unrealized Gain......
Q:
On December 12, 2016, Car entered into three forward exchange contracts, each to purchase 100,000 Canadian dollars in 90 days. Assume a 12 percent interest rate. The relevant exchange rates are as...
A:
1 Assuming that this is a fair value hedge At 123116 9000 is the forward contract fair value 100000......
Q:
The template for exercise 12 gives the prices of the Vanguard Index 500 Fund (symbol: VFINX). This funds prices replicate the S&P 500 with dividends reinvested. Use these data to estimate the...
A:
Estimating the expected return on the SP 500 using all the data from the Vanguard Index 500 Fund VFI......
Q:
Based on the justification-suppression model, explain why individuals act on their prejudicial beliefs.
A:
The justificationsuppression model is a psychological framework that seeks to explain why individuals may act on their prejudicial beliefs It suggests......
Q:
What are the theories that can help managers understand diversity?
A:
Managers can use various theories to understand diversity in the workplace Some of these theories include Social Identity Theory This theory explains......
Q:
Describe challenges that managers must face when managing diversity.
A:
Managing diversity in the workplace can present several challenges for managers Effectively addressing these challenges is crucial for creating an inclusive and equitable work environment Some of the......
Q:
What are the two systems that the brain uses in decision-making? How are they related to programmed and non-programmed decisions?
A:
The two systems that the brain uses in decisionmaking are often referred to as the dualprocess theor......
Q:
How can managers ensure fairness in the interviewing and selection process regarding diversity?
A:
Ensuring fairness in the interviewing and selection process regarding diversity is a critical aspect of promoting diversity and inclusion within an organization Here are some strategies that managers......
Q:
The 3-kg collar B slides on the frictionless arm AA. The arm is attached to drum D and rotates about O in a horizontal plane at the rate = 0.75t, where and t are expressed in rad/s and seconds,...
A:
Kinematics We have At t 0 r 0 Or r 05 tm Also Now Kinetics Or T 084375 t 3 N Or......
Q:
Suppose the government bond described in problem 1 above is held for five years and then the savings institution acquiring the bond decides to sell it at a price of $940. Can you figure out the...
A:
tr msoheightsourceauto col msowidthsourceauto br msodataplacementsamecell style0 msonumberformatGeneral textaligngeneral verticalalignbottom whitespacenowrap msorotate0 msobackgroundsourceauto msopatt......
Q:
Gina Marciano, a 44-year-old mother of eight children, visited her physician complaining of a "bearing down" sensation in her pelvis, low backache, and urinary incontinence. A vaginal examination...
A:
Ms Marciano has a prolapsed uterus no doubt caused by th......
Q:
Considering that the GI tract consists of layers of muscles (see Fig. 8.2), why might exercise help control GERD? The layers of the gastrointestinal tract wall. The wall of the gastrointestinal tract...
A:
GERD gastroesophageal reflux disease is a kind of chronic disorder in which stomach ac which pas......
Q:
Considering an undamped, forced oscillator (b = 0), show that Equation 15.35 is a solution of Equation 15.34, with an amplitude given by Equation 15.36.
A:
Fo cos atkxm x Acosat o dx dt......
Q:
Assume FCFs are $2 million for two years (FCF1 and FCF2) and FCFs grow 3% thereafter. Assume WACC = 7%. Calculate firms value
A:
To calculate the firms value we can use the discounted cash flow......
Q:
For each event that can potentially occur in the transport entity of Fig. 6-20, tell whether it is legal when the user is sleeping in sending state.
A:
None of the primitives can be executed......
Q:
When we represent directions in the x - y plane, we usually represent North and South by the positive and negative y directions respectively, and East and West by the positive and negative x...
A:
To travel 16km NW say one has to travel X km N and Y km W Since it also means that the vector is eq......
Q:
It is false that all mainstream conservatives are people who support free legal services for the poor. Therefore, no mainstream conservatives are people who support free legal services for the poor....
A:
Click to View...
Q:
Ginocera Inc. is a designer, manufacturer, and distributor of low-cost, high-quality stainless steel kitchen knives. A new kitchen knife series called the Kitchen Ninja was released for production in...
A:
1 GINOCERA INC Income Statement For the Year Ended December 31 20Y8 Sales 17920000 Cost of goods sol......
Q:
Jordan wants to invest in an investment property. Jordan has been banking with OFPL with his personal banker, who is the sole shareholder and director of OFPL and works in the business for 20 years....
A:
Jordan may have several relevant equitable claims arising from the circumstances described and the relief available to him may depend on the specific......
Q:
Let T (x, y) mean that student x likes cuisine y, where the domain for x consists of all students at your school and the domain for y consists of all cuisines. Express each of these statements by a...
A:
a Abdallah Hussein does not like Japanese cuisine b Note that this is the conjunction......
Q:
Grant, a sexually active adolescent, appeared in the emergency room complaining of a penile "drip" and pain during urination. An account of his recent sexual behavior was requested and recorded. (a)...
A:
Grant probably has a gonorrhea infection cause......
Q:
Mr. Scanlon, a 76-year-old gentleman, is interested in a much younger woman. Concerned because of his age, he asks his urologist if he will be able to father a child. What questions would a physician...
A:
Mr Scanlon would be asked question......
Q:
Some game shows sponsor tournaments where in each game, three individuals play against each other, yielding one winner and two losers. The winners of three such games then play each other, until the...
A:
a In round one there are 81 players playing in 813 27 games that produce 27 winners to play in round......
Q:
Hair Corp. sells shampoo in the United States and internationally. Its international prices are 30 percent less than its domestic prices. Big Seller, Inc., is in the business of buying products...
A:
It seems like there might be a confusion regarding the terminology used Copyright infringement perta......
Q:
At an Alcoholics Anonymous meeting, a man told his mentor, Timothy McGee, that he had started drinking again because he was so stressed out about his company being acquired. McGee bought stock in...
A:
Legally whether or not Timothy McGee has done something wrong depends on various factors including t......
Q:
Having heard that it was a profitable new business, Smith decided to breed emus. They are flightless birds that reproduce rapidly and provide high-quality meat. For $4,000, Penbridge Farms sold Smith...
A:
In this scenario Smith purchased a proven breeder pair of emus from Penbridge Farms with the underst......
Q:
When Comcast decided to hold a virtual annual shareholders meeting, an investor submitted a proposal that would have required the company to hold a hybrid meetingthat is, both in person and online....
A:
In the United States companies that are publicly traded are required to hold annual shareholders mee......
Q:
Companies are required to _______________. I. Disclose the relationship between financial performance and executive compensation II. Appoint a lead director to run the meetings of the independent...
A:
The correct answer is c I II and III Lets break down each requirement I Disclose the relationship be......
Q:
Determine the ratios of the chemically nonequivalent protons in a compound if the steps of the integration curves measure 40.5, 27, 13, and 118 mm, from left to right across the spectrum. Give the...
A:
By dividing the value of the integration steps by the smalles......
Q:
Coastal Refining Company operates a refinery with a distillation capacity of 12,000 barrels per day. As a new member of Coastal's management team, you have been given the task of developing a...
A:
Coastal Refining Company operates a refinery with a distillation capacity of 12000 barrels per day which feeds crude oil into a pipestill Maximum available crude oil capacity per day is 10000 barrels......
Q:
Debating the Good and Harm of Globalization Recently, a university sponsored a roundtable on the broader implications of international business. The participants were an anti-international business...
A:
Answer1No I dont think that Globalisation and MNE activities are only creating problems for the worlds There are both pros and cons of the globalisation and MNE activitiesAs we can see that due to glo......
Q:
What is the role of education in: (i) Addressing the problems raised in the roundtable; (ii) Creating societies in which people can deal effectively with public policy issues; and (iii) Creating...
A:
Education has a responsibility to cultivate individuals who will become productive membe......
Q:
What is the role of random assignment in the anorexia study?
A:
Random assignment plays the role of assuring as much as is possible......
Q:
Use the test of your choice to determine whether the following series converge. 1 + 1.3 1 3.5 + 1 5.7
A:
ANSWER To determine the convergence of the series lets examine its term......
Q:
How might trade hurt a country if it imports goods that are produced under conditions of external economies of scale?
A:
Trade may stifle the development of new industries that......
Q:
Colah Company purchased $1 million of Jackson, Inc., 5% bonds at par on July 1, 2024, with interest paid semi-annually. Colah determined that it should account for the bonds as an available-for-sale...
A:
Solution 1 The journal entries are as follows i Purchase of bo......
Q:
When will they ever learnthat the Republican party is not for the people who voted for it? Most of the following selections were taken from letters-to-the-editor columns of news papers and magazines....
A:
Click to View...
Q:
Cerulean, Inc., Coral, Inc., and Crimson, Inc., form the Three Cs Partnership on January 1 of the current year. Cerulean is a 50% partner, and Crimson and Coral are 25% partners. For reporting...
A:
October 31 To determine the required tax year of a partnership under the least aggregate deferral me......
Q:
NE gives the populations of the six New England states in millions. NE = {"CT": 3.6, "ME":1.3, "MA": 6.5, "NH": 1.5, "RI":1.1, "VT": 0.6} What will the following print statements produce 1. print...
A:
Lets go through each of your print statements and provide the expected output python NE CT 36 ME 13 MA 65 NH 15 RI 11 VT 06 1 printNEMA Prints the val......
Q:
(a) The mass of 1H in Table 21-1 is 1.007 825 Da. Compare it with the sum of the masses of a proton and an electron given in the table. (b) 2H (deuterium) contains one proton, one neutron, and one...
A:
a b d e Mass of proton electron 1007 276 467 0000 548 580 1007 825047 Da To the number of si......
Q:
Nuthatch Corporation commenced operations on September 1 of the current year. Budgeted sales for the first three months of business (September, October, and November) are $260,000, $375,000, and...
A:
To determine the expected November cash receipts from accounts receivable we need to calculate the s......
Q:
A boatman goes 2 km against the current of the stream in 1 hour and goes 1 km along the current in 10 minutes. How long will it take to go 5 km in stationary water? A)1.30hrs B)3.209hrs C)2.15hrs...
A:
The detailed......
Q:
A chemical process plant that has a total purchased equipment cost of 1250000 TL manufactures 100000 kg of product annually. Estimate if working capital amounts to 15 percent of the total capital...
A:
Solution Purchased Equipment Cosat PEC amount froduce annually 1250000 TL 100000 kg Working Capital......
Q:
True or False Gross Profit = Sales + Cost of Goods Sold = Sales (Purchases Ending Inventory)
A:
False Gross Profit is calculated as follows Gross Profit......
Q:
In Problems 920, use the information given about the angle , 0 < 2, to find the exact value of: (a) sin(20) (b) cos(20) (c) sin (d) cos 2 (e) tan(20) (f) tan-
A:
tan sin cos ve given either sin ve cos ve or sin ve cos ve Also given sin ve hence cos ve......
Q:
How does the treatment in books differ for short-term investments vis--vis long-term investments? Explain.
A:
The treatment of shortterm investments and longterm investments in books differs primarily in terms of their classification accounting methods and the......
Q:
True or False Management remuneration packages, having profit-linked bonuses, may influence the selection of a depreciation method.
A:
True Management remuneration packages particularly those with profitlinked bonuses can indeed influence the selection of a depreciation method This in......
Q:
Discuss and inter-connect these ratios; Dividend per share, Earning per share and Dividend Payout Ratio?
A:
Dividend per Share DPS Earnings per Share EPS and Dividend Payout Ratio Earnings per Share EPS EPS is a financial metric that represents the portion of a companys profit allocated to each outstanding......
Q:
The owner of a tourist hotel is facing a difficult decision. It is low season and because the weather is unpredictable at this time of the year it is difficult to predict the demand for the hotel s...
A:
AnsaDecision Tree Best way for him is to not go for advertisement and bank upon Goo......
Q:
1. Using the information from Problem 16-4B, prepare a statement of cash flows for Lim Garden Supplies Inc. using the direct method of presenting cash flows from operating activities. 2. How does Lim...
A:
a Lim Garden Supplies Inc Statement of Cash Flows For the Year Ended December 31 2013 Cash flows fro......
Stochastic Simulation And Applications In Finance With MATLAB Programs 1st Edition - ISBN: 0470725389 - Free Book