12 Problem 9-19 (Algo) (LO 9-9) 1.43 points Shandra Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 104,000 pounds, with delivery and payment to be made on June 15. On April 15, when the spot rate is $1.34 per pound, Shandra purchases a two-month call option on 104,000 pounds and designates this option as a cash flow hedge of a forecasted foreign currency transaction. The time value of the option is excluded in assessing hedge effectiveness; the change in time value is recognized in net income over the life of the option. The option has a strike price of $1.34 per pound and costs $1,040. The goods are received and paid for on June 15. Shandra sells the imported goods in the local market immediately. The spot rate for pounds is $1.390 on June 15. Required: a-1. Prepare all journal entries for Shandra Corporation related to this transaction and hedge. a-2. What amount should Shandra Corporation report in net income as cost of goods sold for the quarter ending June 30? b. What amount should Shandra Corporation report in net income as foreign exchange gain or loss for the quarter ending June 30?
12 Problem 9-19 (Algo) (LO 9-9) 1.43 points Shandra Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 104,000 pounds, with delivery and payment to be made on June 15. On April 15, when the spot rate is $1.34 per pound, Shandra purchases a two-month call option on 104,000 pounds and designates this option as a cash flow hedge of a forecasted foreign currency transaction. The time value of the option is excluded in assessing hedge effectiveness; the change in time value is recognized in net income over the life of the option. The option has a strike price of $1.34 per pound and costs $1,040. The goods are received and paid for on June 15. Shandra sells the imported goods in the local market immediately. The spot rate for pounds is $1.390 on June 15. Required: a-1. Prepare all journal entries for Shandra Corporation related to this transaction and hedge. a-2. What amount should Shandra Corporation report in net income as cost of goods sold for the quarter ending June 30? b. What amount should Shandra Corporation report in net income as foreign exchange gain or loss for the quarter ending June 30?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:12
Problem 9-19 (Algo) (LO 9-9)
1.43
points
Shandra Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 104,000 pounds, with
delivery and payment to be made on June 15. On April 15, when the spot rate is $1.34 per pound, Shandra purchases a two-month call
option on 104,000 pounds and designates this option as a cash flow hedge of a forecasted foreign currency transaction. The time
value of the option is excluded in assessing hedge effectiveness; the change in time value is recognized in net income over the life of
the option. The option has a strike price of $1.34 per pound and costs $1,040. The goods are received and paid for on June 15.
Shandra sells the imported goods in the local market immediately. The spot rate for pounds is $1.390 on June 15.
Required:
a-1. Prepare all journal entries for Shandra Corporation related to this transaction and hedge.
a-2. What amount should Shandra Corporation report in net income as cost of goods sold for the quarter ending June 30?
b. What amount should Shandra Corporation report in net income as foreign exchange gain or loss for the quarter ending June 30?
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education