Moonview Company uses approximately 200,000 units of raw material in its manufacturing operations. On December 1, 2021, the entity purchased a call option to buy 200,000 units of the raw material on July 1, 2022 at a strike price of ₱25 per unit. The entity paid ₱20,000 for the call option. The entity designated the call option as a cash flow hedge against price fluctuation for its July purchase. The market price of the raw materials is ₱28 on December 31, 2021 and ₱21 on July 1, 2022. 1. What is the derivative asset on December 31, 2021? a. 600,000 b. 580,000 c. 20,000 d. 0 2. What is the derivative liability on July 1, 2022? a. 800,000 b. 400,000 c. 780,000 d. 0 3. What is the cost of purchases on July 1, 2022? a. 5,000,000 b. 4,980,000 c. 4,200,000 d. 4,220,000
Moonview Company uses approximately 200,000 units of raw material in its
manufacturing operations.
On December 1, 2021, the entity purchased a call option to buy 200,000 units of
the raw material on July 1, 2022 at a strike price of ₱25 per unit.
The entity paid ₱20,000 for the call option. The entity designated the call option
as a
The market price of the raw materials is ₱28 on December 31, 2021 and ₱21 on
July 1, 2022.
1. What is the derivative asset on December 31, 2021?
a. 600,000
b. 580,000
c. 20,000
d. 0
2. What is the derivative liability on July 1, 2022?
a. 800,000
b. 400,000
c. 780,000
d. 0
3. What is the cost of purchases on July 1, 2022?
a. 5,000,000
b. 4,980,000
c. 4,200,000
d. 4,220,000
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