Please provide answer this general accounting question not use ai On November 1, 2022, Prime Textiles Ltd. entered into a transactionto import raw materials from a foreign supplier. The account is to besettled February 1, 2023, with the payment of 40,000 euros. Thespot rate for euros on November 1, 2022, was $1.2/euro, and onFebruary 1, 2023, it was $1.25/euro. If Prime Textiles does not hedgethe payable, raw materials will be recorded on the books onFebruary 1, 2023, at what amount?A. $50,000B. $48,000C. None of theseD. 40,000 euros

Step 1: Define Currency TransactionA currency transaction involves converting a foreign currency…

Answered: On November 1, 2022, Prime Textiles…

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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On October 1, 2021, A Corp. purchased goods from US based corporation worth 60,500 US dollars. Payment is due in 120 days on January 30, 2022. In view of the transaction, Active Corp. entered into a forward contract to buy 60,500 US dollars from PNB in 120 days. The relevant rates are as follows: 10/01/21 12/31/21 01/30/22 Spot rate P 53 P 55 P 53.50 Forward rate 54 56.50 55How much is the net forex loss on settlement date?
On October 15, 2020, Buy Co., a Canadian company, entered into a contract to purchase goods from Sell Ltd., a foreign corporation. The contract terms called for the goods to be delivered to Buy Co.'s Calgary location on June 30, 2021. The cost of goods is USD $600,000 to be settled on July 31, 2021. On October 15, 2020, Buy Co. also arranged for a forward contract through its bank for USD $600,000. The goods were delivered on time, and Buy Co. settled with Sell Ltd. on July 31, 2021. Buy Co. has a May 31 year-end. The spot and forward rates are as follows: Spot Rate ($CAD): 1 USD = x.xx CAD Forward Rate ($CAD): 1 USD = x.xx CAD October 15, $1.42 $1.46 2020 May 31, 2021 $1.44 $1.48 June 30, $1.45 $1.49 2021 July 31, 2021 $1.50 $1.50 Required Prepare Buy Co.'s journal entries to reflect the above assuming that: a. the hedge is a cash flow hedge, and b. the hedge is a fair value hedge.
4
Daltrey Company purchased recording equipment from The Detours Inc. for £250,000 on September 21, 2020. Payment is due to The Detours, Inc. on December 19, 2020. Additionally, on September 21, Daltrey entered into a 90-day forward contract to purchase £250,000 at a rate of £1 = $1.23. The forward contract was entered into to manage the exposed net liability position in UK Pounds, but it was not designated as a hedge. The spot rates were: 09/21/20 £1 = $1.21 12/20/20 £1 = $1.24 Looking back on the entire situation (i.e., the original transaction and the forward contract) in terms of the US$ needed to settle both transactions, did entering into the forward contract work out well for Daltrey Company
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Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 16,000 dinars to be received on March 1, 2021. Icebreaker enters into a forward contract on December 1, 2020, to sell 16,000 dinars on March 1, 2021. The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.40 $ 3.475 December 31, 2020 3.50 3.600 March 1, 2021 3.65 N/A Icebreaker must close its books and prepare financial statements at December 31. a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries for the sale and foreign currency forward contract in U.S. dollars. a-2. What is the impact on…
Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 14,000 dinars to be received on March 1, 2021. Icebreaker enters into a forward contract on December 1, 2020, to sell 14,000 dinars on March 1, 2021. The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $3.20 $ 3.275 December 31, 2020 3.30 3.400 March 1, 2021 3.45 N/A Icebreaker must close its books and prepare financial statements at December 31. a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries for the sale and foreign currency forward contract in U.S. dollars. a-2. What is the impact on 2020 net income? a-3.…
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