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

On June 1, CamCo received a signed agreement to sell inventory for ¥500,000.The sale would take place in 90 days.CamCo immediately signed a 90-day forward contract to sell the yen as soon as they are received.The spot rate on June 1 was ¥1 =$.004167, and the 90-day forward rate was ¥1 = $.00427.At what amount would CamCo record the Forward Contract on June 1?

For each of the following situations, select the best answer concerning accounting for foreign currency transactions: (G) Results in a foreign exchange gain. (L) Results in a foreign exchange loss. (N) No foreign exchange gain or loss. _____1.Export sale by a U.S.company denominated in dollars, foreign currency of buyer appreciates. _____2.Export sale by a U.S.company denominated in foreign currency, foreign currency of buyer appreciates. _____3.Import purchase by a U.S.company denominated in foreign currency, foreign currency of buyer appreciates. _____4.Import purchase by a U.S.company denominated in dollars, foreign currency of buyer appreciates. _____5.Import purchase by a U.S.company denominated in foreign currency, foreign currency of buyer depreciates. _____6.Import purchase by a U.S.company denominated in dollars, foreign currency of buyer depreciates. _____7.Export sale by a U.S.company denominated in dollars, foreign currency of buyer depreciates. _____8.Export sale by a U.S.company denominated in foreign currency, foreign currency of buyer depreciates.

Compute the fair value of the foreign currency option at December 31, 2018.

What is meant by the spot rate?

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

Assuming a forward contract was entered into, the foreign currency was originally sold in the foreign currency market on December 16, 2018 at a

What happens when a U.S.company purchases goods denominated in a foreign currency and the foreign currency appreciates?

On December 1, 2018, Joseph Company, a U.S.company, entered into a three-month forward contract to purchase 50,000 pesos on March 1, 2019, as a fair value hedge of a foreign currency denominated account payable.The following U.S.dollar per peso exchange rates apply: Joseph's incremental borrowing rate is 12 percent.The present value factor for two months at an annual interest rate of 12 percent is .9803.Which of the following is included in Joseph's December 31, 2018 balance sheet for the forward contract?

Where can you find exchange rates between the U.S.dollar and most foreign currencies?

Gaw Produce Company purchased inventory from a Japanese company on December 18, 2018.Payment of 4,000,000 yen (¥) was due on January 18, 2019.Exchange rates between the dollar and the yen were as follows: Required: Prepare all journal entries for Gaw Produce Co.in connection with the purchase and payment.

For what amount should Sales be credited on December 1?

What happens when a U.S.company purchases goods denominated in a foreign currency and the foreign currency depreciates?

What happens when a U.S.company sells goods denominated in a foreign currency and the foreign currency appreciates?

What was the net increase or decrease in cash flow from having purchased the foreign currency option to hedge this exposure to foreign exchange risk?

Which of the following is not a condition of accounting for hedge derivatives?

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

U.S.GAAP provides guidance for hedges of all the following sources of foreign exchange risk except

What is the amount of Cost of Goods Sold for 2019 as a result of these transactions?

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