O a. 400,000 asset
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:13. Indang Company requires 40,000 kilos of
soya beans each month in its operations. To
eliminate the price risk associated with the
purchase of soya beans, on December 1,
2011, Indang entered into a futures contract
as a cash flow hedge to buy 40,000 kilos of
soya beans at P150 per kilo on March 1, 2012.
The market price on December 31, 2011 and
March 1, 2012 is P160 per kilo. The
appropriate discount rate is 9% and the
present value of 1 at 9% for one period is
0.917. What amount should be recognized by
Indang Company on December 31, 2011 as
derivative asset or liability?
a. 400,000 asset
b. 400,000 liability
c. 366,800 asset
O d. 366,800 liability
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