AccountingCar Corp. (a U.S.-based company) sold parts to a Japanese customer onDecember 1, 2020, with payment of 10 million Japanese yen to be received onJanuary 31, 2021. The following exchange rates applied:DateSpot rateForward rate to 01/31/210.000900.000930.000920.000980.00095December 1, 2020December 31, 2020January 31, 2021Assuming a forward contract was entered into, what would be the net impacton Car Corp.'s 2020 income statement related to this foreign currencytransaction? Assume an annual interest rate of 12% and a fair value hedge. Thepresent value for one month at 12% is .9901.A. $295.05 (loss).B. $ 300 (gain).C. $ 300 (loss).D. $ 700 (gain).E. $ 700 (loss).0.00095

Answer A: $ 295.05 (Loss) Detailed Explanation has been given for the above answer please follow:…

Answered: A. $295.05 (loss).

Business

Accounting

A. $295.05 (loss).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Accounting
Car Corp. (a U.S.-based company) sold parts to a Japanese customer on
December 1, 2020, with payment of 10 million Japanese yen to be received on
January 31, 2021. The following exchange rates applied:
Date
Spot rate
Forward rate to 01/31/21
0.00090
0.00093
0.00092
0.00098
0.00095
December 1, 2020
December 31, 2020
January 31, 2021
Assuming a forward contract was entered into, what would be the net impact
on Car Corp.'s 2020 income statement related to this foreign currency
transaction? Assume an annual interest rate of 12% and a fair value hedge. The
present value for one month at 12% is .9901.
A. $295.05 (loss).
B. $ 300 (gain).
C. $ 300 (loss).
D. $ 700 (gain).
E. $ 700 (loss).
0.00095

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