Question 3.3. Assume you work for a Norwegian company exporting a container of Salman Azerbaijan or Haiti. The customs official informs you that there is a delay in clearing your container through customs, and it may last a month. However, if you are willing to pay an "expediting fee" of $200, he will try to make it happen in one day. What are you going to do?

Question 3.3. Assume you work for a Norwegian company exporting a container of Salman Azerbaijan or Haiti. The customs official informs you that there is a delay in clearing your container through customs, and it may last a month. However, if you are willing to pay an "expediting fee" of $200, he will try to make it happen in one day. What are you going to do?

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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From the case study, only respond to question #3
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Question 3 Consider the following information. 1. On September 1, 2022, a US firm contracts to buy equipment with an asking price of £100,000 from a firm in the U.K. The firm will take delivery and will pay for the equipment on March 1, 2023. 2. On that same day, September 1, 2022, the US firm enters into a forward contract to buy £100,000 for US$1.60/£ on March 1, 2023. 3. Spot rates and forward rates were quoted as follows: Spot Rate $1.59/£ $1.55/£ March 1, 2023 $1.57/£ On March 1, 2022, the payment of £100,000 was made to the supplier of the equipment. 4. September 1, 2022 September 30, 2022 Forward Rate $1.60/£ $1.53/£ Required: a. Prepare the journal entries needed for the forward contract transaction done on September 1, 2022. b. Prepare the journal entries needed for the transactions to track the forward contract on September 30, 2022, the financial year-end of the US firm. c. Prepare the transactions for the recognition of the actual purchase of the equipment and settlement of…
Question 1 Alfred Yeo is an importer of European Cars into Singapore. He has recently entered a contract with a German exporter to import Euro 25 million worth of vehicles for his clients based in Singapore. Alfred has to make the payment in 120 days when the cars will be supplied. There is speculation that the Euro will appreciate in 120 days by 1.25% The exchange rate today is Spoto EUR/SGD = 1.38 a) To hedge himself, Alfred enters into a Forward Contract. Work out how much Alfred saves, assuming that the spot rate at 120 days is 1.25% higher. b) What if the Euro actually depreciates by 1.75% at Day 120? What would Alfred's expense situation be, assuming he went ahead and hedged with F120 EUR/SGD = 1.38?