Home Products Inc. (HPI) entered into a contract on June 30, Year 1, to buy 750,000 pounds of aluminum siding on September 30, Year 1, at a price of $18.25 a pound The company's troasurer simultaneously took a short position in a forward contact by agreeing to sell 750,000 pounds of aluminum at a price of $16 50 a pound on September 30, Year 1. Assume the following prices for aluminum siding and the aluminum forward contract. June 30 Year 1 September 30 Year 1 Aluminum siding / lb. $18.25 $17.95 Aluminum forward/Ib $16.50 $16.32 Based on the above what is the earnings effect of the aluminum siding purchase commitment with the corresponding fair value hedge at the September 30, Year 1 end?
Home Products Inc. (HPI) entered into a contract on June 30, Year 1, to buy 750,000 pounds of aluminum siding on September 30, Year 1, at a price of $18.25 a pound The company's troasurer simultaneously took a short position in a forward contact by agreeing to sell 750,000 pounds of aluminum at a price of $16 50 a pound on September 30, Year 1. Assume the following prices for aluminum siding and the aluminum forward contract. June 30 Year 1 September 30 Year 1 Aluminum siding / lb. $18.25 $17.95 Aluminum forward/Ib $16.50 $16.32 Based on the above what is the earnings effect of the aluminum siding purchase commitment with the corresponding fair value hedge at the September 30, Year 1 end?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 9MC
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![Home Products Inc. (HPI) entered into a contract on June 30, Year 1, to buy 750,000 pounds of aluminum siding on September
30, Year 1, at a price of $18.25 a pound. The company's troasurer simultaneously took a short position in a forward contact by
agreeing to sell 750,000 pounds of aluminum at a price of $16 50 a pound on September 30, Year 1. Assume the following
prices for aluminum siding and the aluminum forward contract.
June 30 Year 1 September 30 Year 1
Aluminum siding / lb.
$18.25
$17 95
$16.50
$16.32
Aluminum forward / Ib
Based on the above what is the earnings effect of the aluminum siding purchase commitment with the corresponding fair value
hedge at the September 30, Year 1 end?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9be39e5a-adc9-4cad-97c7-318042e2bc70%2F78c54c9a-d100-4067-ab25-0b15c2eea469%2Fcvym69v_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Home Products Inc. (HPI) entered into a contract on June 30, Year 1, to buy 750,000 pounds of aluminum siding on September
30, Year 1, at a price of $18.25 a pound. The company's troasurer simultaneously took a short position in a forward contact by
agreeing to sell 750,000 pounds of aluminum at a price of $16 50 a pound on September 30, Year 1. Assume the following
prices for aluminum siding and the aluminum forward contract.
June 30 Year 1 September 30 Year 1
Aluminum siding / lb.
$18.25
$17 95
$16.50
$16.32
Aluminum forward / Ib
Based on the above what is the earnings effect of the aluminum siding purchase commitment with the corresponding fair value
hedge at the September 30, Year 1 end?
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