Questions 21 - 27 use the same facts, listed below and repeated for each question: On Nov. 1, 20x1, TasteeFood Co., a U.S. company, purchased and received 15 tons of assorted dried peppers from Ola Co. which is located in Mexico. The peppers cost a total of 100 million pesos but TasteeFood does not plan to pay the related payable until Feb. 1,20x2. TasteeFood is concerned that pesos may increase in value so decided on Nov. 1, 20x1 to hedge using a forward contract, with a forward price of $0.047/peso. Some rates are: Date 11/1/20x1 12/31/20x1 Spot Rate $0.050/peso $0.052/peso Forward Rate (2/1/20 delivery) $0.047/peso $0.051/peso $0.056/peso 2/1/20x2 $0.056/peso Q24: Make any journal entries needed on 12/31/20x1 (a reporting date) for anything related to the purchase and forward. Use that entry or entries to answer this question: What is the total effect of any entries needed on Dec 31, 20x1 on Net Income? $200,000 decrease (B) $400,000 increase C) $400,000 decrease D) $200,000 increase E) None of the above
Questions 21 - 27 use the same facts, listed below and repeated for each question: On Nov. 1, 20x1, TasteeFood Co., a U.S. company, purchased and received 15 tons of assorted dried peppers from Ola Co. which is located in Mexico. The peppers cost a total of 100 million pesos but TasteeFood does not plan to pay the related payable until Feb. 1,20x2. TasteeFood is concerned that pesos may increase in value so decided on Nov. 1, 20x1 to hedge using a forward contract, with a forward price of $0.047/peso. Some rates are: Date 11/1/20x1 12/31/20x1 Spot Rate $0.050/peso $0.052/peso Forward Rate (2/1/20 delivery) $0.047/peso $0.051/peso $0.056/peso 2/1/20x2 $0.056/peso Q24: Make any journal entries needed on 12/31/20x1 (a reporting date) for anything related to the purchase and forward. Use that entry or entries to answer this question: What is the total effect of any entries needed on Dec 31, 20x1 on Net Income? $200,000 decrease (B) $400,000 increase C) $400,000 decrease D) $200,000 increase E) None of the above
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
mn.3
Transcribed Image Text:Questions 21 - 27 use the same facts, listed below and repeated for each question:
On Nov. 1, 20x1, TasteeFood Co., a U.S. company, purchased and received 15 tons of assorted dried peppers from Ola Co. which is
located in Mexico. The peppers cost a total of 100 million pesos but TasteeFood does not plan to pay the related payable until Feb.
1,20x2.
TasteeFood is concerned that pesos may increase in value so decided on Nov. 1, 20x1 to hedge using a forward contract, with a
forward price of $0.047/peso. Some rates are:
Date
11/1/20x1
12/31/20x1
Spot Rate
$0.050/peso
$0.052/peso
Forward Rate (2/1/20 delivery)
$0.047/peso
$0.051/peso
$0.056/peso
2/1/20x2
$0.056/peso
Q24: Make any journal entries needed on 12/31/20x1 (a reporting date) for anything related to the purchase and forward. Use that
entry or entries to answer this question: What is the total effect of any entries needed on Dec 31, 20x1 on Net Income?
$200,000 decrease
(B) $400,000 increase
C) $400,000 decrease
D) $200,000 increase
E) None of the above
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education