4 points eBook Print References On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.40 per Norwegian krone, Derby enters into a forward contract to purchase 590,000 Norwegian kroner at a three-month forward rate of $0.45. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.441 per Norwegian krone, Derby orders and receives the merchandise, paying 590,000 kroner. The merchandise is sold within 30 days. Required: a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge. a-2. What amount should Derby Corporation report in the current year's net income as cost of goods sold? b. What amount should Derby Corporation report in the current year's net income as foreign exchange gain or loss? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B What amount should Derby Corporation report in the current year's net income as cost of goods sold? Cost of goods sold $ 260,190 < Req A1 Req B > Check

4 points eBook Print References On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.40 per Norwegian krone, Derby enters into a forward contract to purchase 590,000 Norwegian kroner at a three-month forward rate of $0.45. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.441 per Norwegian krone, Derby orders and receives the merchandise, paying 590,000 kroner. The merchandise is sold within 30 days. Required: a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge. a-2. What amount should Derby Corporation report in the current year's net income as cost of goods sold? b. What amount should Derby Corporation report in the current year's net income as foreign exchange gain or loss? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B What amount should Derby Corporation report in the current year's net income as cost of goods sold? Cost of goods sold $ 260,190 < Req A1 Req B > Check

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 9QA

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On 2nd March 2022 Star Exporters have received export order for USD 2 million for shipment to Germany between 15th March to 30th March 2022. The letter of credit to that extent was received by the exporters and the documents were required to be submitted within 15 days from the date of shipment. The payment terms are 90 days sight. Rates on 2nd March 2022 (Spot Date 6th March 2022) are as follows: Spot USD 44.3500 / 44.3800 Forward July 45/46 When bank is quoting as above it means, the bank would buy at ___ Rate and Sell at ___ Rate a. Spot, Ask b. Bid, Spot c. Spot, Forward d. Bid, Ask
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21. On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.41 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.36. At the end of three months, the spot rate is $1.37 per euro, and Quality delivers the merchandise, collecting 400,000 euros. What amount will Quality recognize in Sales from these transactions? a.0 b.400,000 c.544000 d.548000 e.564000
Brandlin company of anaheim, california sells parts to a foreign customer on december 1, 2017, with payment of 24,000 korunas to be received on march 1, 2018. Breanlin enters into a forward contract on december 1, 2017, to sell 24,000 korunas on march 1, 2018. Relevant exchange rates for the koruna on various dates are as follow: Date Spot Rate Forward Rate December 1, 2017 4.20 4.275 December 31, 2017 4.30 4.400 March 1, 2018 4.45 N/A 1. Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in US dollars. 2. What is the impact on 2017 net income? 3. What is the impact on 2018 net income? What is the impact on net income over the two accounting periods?
On June 1, 2009, Benguet Manufacturing Corp. received raw materials from aforeign vendor when the spot rate is P 40.00. Payment of 100,000 foreign currency is due in 90days. On the same date, the company acquired a forward contract to buy 120,000 foreigncurrency in 90 days. The following forward rates per foreign currency were available: June 1, 90-day rate 40.30 June 30, 60-day rate40.40 July 31, 30-day rate40.10 1.What is the contract gain (loss) on hedge on an exposed position? a.(40,000) b.(30,000)c.(20,000) d.(10,000) 2. What is the exchange gain (loss) on a speculative contract in June 2009
An importer in Oman wants to exchange OMR to KWD to make payment to the exporter in Kuwait after 3 months. He goes to a forex dealer in Oman who provides the following quotes for OMR/KWD. Spot rate =1.25695-6972 3 months rate = 1.32692-3642 How much OMR will the importer need to get KWD55000 after 3 months? a. 123274.8 b. All the options are wrong c. 122125.5 d. 73503.1 e. 72980.6
On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,004,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,004,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows: Date Spot Rate Forward Rate(to January 31, 2021) October 1, 2020 $ 0.27 $ 0.31 December 31, 2020 0.30 0.34 January 31, 2021 0.32 N/A Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored. Prepare journal entries for the foreign currency forward contract,…
On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,030,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,030,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows: Date Spot Rate Forward Rate(to January 31, 2021) October 1, 2020 $ 0.26 $ 0.30 December 31, 2020 0.29 0.33 January 31, 2021 0.31 N/A Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored. Prepare journal entries for the foreign currency forward contract,…
On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,030,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,030,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows: Date Spot Rate Forward Rate(to January 31, 2021) October 1, 2020 $ 0.26 $ 0.30 December 31, 2020 0.29 0.33 January 31, 2021 0.31 N/A Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored. Determine the net benefit, if any, realized by Mertag from entering…