Exam 9: A: Foreign Currency Transactions and Hedging Foreign Exchange Risk

Assuming a forward contract was entered into on December 16, how would the forward contract be reflected on Car's December 31, 2018 balance sheet?

Primo Inc., a U.S.company, ordered parts costing 100,000 rupee from a foreign supplier on July 7 when the spot rate was $.025 per rupee.A one-month forward contract was signed on that date to purchase 100,000 rupee at a rate of $.027.The forward contract is properly designated as a fair value hedge of the 100,000 rupee firm commitment.On August 7, when the parts are received, the spot rate is $.028.At what amount should the payable be carried on Primo's books?

Which of the following approaches is used in the United States in accounting for foreign currency transactions?

A U.S.company buys merchandise from a foreign company denominated in U.S.dollars.Which of the following statements is true?

What is the amount of Adjustment to Accumulated Other Comprehensive Income for 2019 from these transactions?

The beginning balance of cash was 50,000 pesos on January 1, 2018, translated at 1 peso = $.18.What amount will Coyote Corp.report in its 2018 balance sheet for Cash?

Assuming a forward contract was entered into on December 16, what would be the net impact on Car Corp.'s 2018 income statement related to this transaction? Assume an annual interest rate of 12% and a fair value hedge.The present value for one half-month at 12% is .9950.

What amount will Coyote Corp.report in its 2018 balance sheet for Accounts payable?

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at the balance sheet date

What amount will Woolsey include as Adjustment to Net Income for the period ended October 31?

Assuming a forward contract was entered into on December 16, at what amount should the forward contract be recorded at December 31, 2018? Assume an annual interest rate of 12% and a fair value hedge.The present value for one month at 12% is .9901.

All of the following data points are needed to determine the fair value of a forward contract (at any point), EXCEPT

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at initiation date requires which of the following?

Assuming this is a cash flow hedge; prepare journal entries for this sales transaction and forward contract.

Belsen purchased inventory on December 1, 2017.Payment of 200,000 stickles was to be made in sixty days.Also on December 1, Belsen signed a contract to purchase §200,000 in sixty days.The spot rate was §1 = .35714, and the 60-day forward rate was §1 = $.38462.On December 31, the spot rate was §1 = .34483 and the 30-day forward rate was §1 = .38168.Assume an annual interest rate of 12% and a fair value hedge.The present value for one month at 12% is .9901. In the journal entry to record the establishment of a forward exchange contract, at what amount should the Forward Contract account be recorded on December 1?

A U.S.company sells merchandise to a foreign company denominated in U.S.dollars.Which of the following statements is true?

What amount should be included as a foreign exchange gain or loss from the two transactions for 2018?

A U.S.company buys merchandise from a foreign company denominated in the foreign currency.Which of the following statements is true?

When a U.S.company purchases parts from a foreign company, which of the following will result in zero foreign exchange gain or loss?

The forward rate may be defined as