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

A forward contract may be used for which of the following? 1) A fair value hedge of an asset. 2) A cash flow hedge of an asset. 3) A fair value hedge of a liability. 4) A cash flow hedge of a liability.

What journal entry should Eagle prepare on October 1, 2018?

(A.) Assume this hedge is designated as a fair value hedge.Prepare the journal entries relating to the transaction and the forward contract. (B.) Compute the effect on 2018 net income. (C.) Compute the effect on 2019 net income.

How much foreign exchange gain or loss should be included in Shannon's 2018 income statement?

What factors create a foreign exchange gain?

What are the two separate transactions that require recording under the two-transaction perspective?

Which statement is true regarding a foreign currency option?

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

What amount of foreign exchange gain or loss should be recorded on January 30?

Mills Inc.had a receivable from a foreign customer that is due in the local currency of the customer (stickles).On December 31, 2018, this receivable for §200,000 was correctly included in Mills' balance sheet at $132,000.When the receivable was collected on February 15, 2019, the U.S.dollar equivalent was $144,000.In Mills' 2019 consolidated income statement, how much should have been reported as a foreign exchange gain?

What was the net impact on Mattie's 2019 income including the fair value hedge of a firm commitment?

Lawrence Company, a U.S.company, ordered parts costing 1,000,000 Thailand bahts from a foreign supplier on July 7 when the spot rate was $.025 per baht.A one-month forward contract was signed on that date to purchase 1,000,000 bahts at a rate of $.027.The forward contract is properly designated as a fair value hedge of the 1,000,000 baht firm commitment.On August 7, when the parts are received, the spot rate is $.028.What is the amount of accounts payable that will be paid at this date?

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

Assuming a forward contract was not entered into, what would be the net impact on Car Corp.'s 2018 income statement related to this transaction?

What was the net impact on Mattie's 2018 income as a result of this fair value hedge of a firm commitment?

Alpha, Inc., a U.S.company, had a receivable from a customer that was denominated in Mexican pesos.On December 31, 2017, this receivable for 75,000 pesos was correctly included in Alpha's balance sheet at $8,000.The receivable was collected on March 2, 2018, when the U.S.equivalent was $6,900.How much foreign exchange gain or loss will Alpha record on the income statement for the year ended December 31, 2018?

Which of the following statements is true concerning hedge accounting?

Williams, Inc., a U.S.company, has a Japanese yen account receivable resulting from an export sale on March 1 to a customer in Japan.The exporter signed a forward contract on March 1 to sell yen and designated it as a cash flow hedge of a recognized receivable.The spot rate was $.0094, and the forward rate was $.0095.Which of the following did the U.S.exporter report in net income?

Angela, Inc., a U.S.company, had a euro receivable from exports to Spain and a British pound payable resulting from imports from England.Angela recorded foreign exchange gain related to both its euro receivable and pound payable.Did the foreign currencies increase or decrease in dollar value from the date of the transaction to the settlement date?

What amount should be included as a foreign exchange gain or loss from the two transactions for 2019?