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Req B1 ignates the foreign currency option as a fair value rt sale and related hedge in U.S. dollars. (Do not vent, select "No journal entry required" in the firs counts receivable (P) es eign currency option Req B2 General Journal

Req B1 ignates the foreign currency option as a fair value rt sale and related hedge in U.S. dollars. (Do not vent, select "No journal entry required" in the firs counts receivable (P) es eign currency option Req B2 General Journal

FINANCIAL ACCOUNTING
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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Complete this question by entering your answers in the tabs below. Req B1 Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No 1 2 3 4 5 6 7 8 9 10 Req A1 11 12 Date 06/01 06/01 06/30 06/30 06/30 06/30 09/01 09/01 09/01 09/01 09/01 Req A2 09/01 Accounts receivable (P) Sales Foreign currency option Cash Foreign exchange gain or loss Accounts receivable (P) Req 82 Foreign exchange gain or loss Foreign currency option No journal entry required No journal entry required Foreign exchange gain or loss Accounts receivable (P) General Journal Foreign exchange gain or loss Foreign currency option No journal entry required No journal entry required Foreign currency (P) Accounts receivable (P) Cash Foreign currency (P) Foreign currency option < Req A2 Req B2 > 33 >> > 33 33 3 > 33 333 Debit Credit
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Req B1 Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No 1 2 3 4 5 6 7 8 9 10 Req A1 11 12 Date 06/01 06/01 06/30 06/30 06/30 06/30 09/01 09/01 09/01 09/01 09/01 Req A2 09/01 Accounts receivable (P) Sales Foreign currency option Cash Foreign exchange gain or loss Accounts receivable (P) Req 82 Foreign exchange gain or loss Foreign currency option No journal entry required No journal entry required Foreign exchange gain or loss Accounts receivable (P) General Journal Foreign exchange gain or loss Foreign currency option No journal entry required No journal entry required Foreign currency (P) Accounts receivable (P) Cash Foreign currency (P) Foreign currency option < Req A2 Req B2 > 33 >> > 33 33 3 > 33 333 Debit Credit
On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,110,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,110,000 pesos in three months at a strike price of $0.076. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Date June 1 June 30 September 1 Maxwell must close its books and prepare its second-quarter financial statements on June 30. a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2. What is the impact on net income over the two accounting periods? b-1. Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. b-2. What is the impact on net income over the two accounting periods? Complete this question by entering your answers in the tabs below. No 1 2 3 4 5 Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 6 7 8 9 10 Red A1 11 12 Date 06/01 06/01 06/30 06/30 06/30 06/30 09/01 09/01 Spot Rate $ 0.076 0.075 0.074 09/01 09/01 09/01 Put Option Premium for September 1 (strike price $0.076) $ 0.0039 0.0029 N/A Req A2 09/01 Req B1 Accounts receivable (P) Sales Foreign currency option Cash > Answer is not complete. Req B2 Foreign exchange gain or loss Accounts receivable (P) Other comprehensive income Foreign currency option General Journal Other comprehensive income Foreign exchange gain or loss Foreign exchange gain or loss Other comprehensive income Foreign exchange gain or loss Accounts receivable (P) Other comprehensive income Foreign currency option Foreign currency (P) Accounts receivable (P) Other comprehensive income Foreign exchange gain or loss Cash Foreign currency (P) Foreign currency option Foreign exchange gain or loss Other comprehensive income < Req A1 Req A2 > ✔ ✔ ✔ ✔ ✔ ♥ ✔ ✔ 00 00 00 ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Debit Credit
Transcribed Image Text:On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,110,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,110,000 pesos in three months at a strike price of $0.076. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Date June 1 June 30 September 1 Maxwell must close its books and prepare its second-quarter financial statements on June 30. a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2. What is the impact on net income over the two accounting periods? b-1. Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. b-2. What is the impact on net income over the two accounting periods? Complete this question by entering your answers in the tabs below. No 1 2 3 4 5 Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 6 7 8 9 10 Red A1 11 12 Date 06/01 06/01 06/30 06/30 06/30 06/30 09/01 09/01 Spot Rate $ 0.076 0.075 0.074 09/01 09/01 09/01 Put Option Premium for September 1 (strike price $0.076) $ 0.0039 0.0029 N/A Req A2 09/01 Req B1 Accounts receivable (P) Sales Foreign currency option Cash > Answer is not complete. Req B2 Foreign exchange gain or loss Accounts receivable (P) Other comprehensive income Foreign currency option General Journal Other comprehensive income Foreign exchange gain or loss Foreign exchange gain or loss Other comprehensive income Foreign exchange gain or loss Accounts receivable (P) Other comprehensive income Foreign currency option Foreign currency (P) Accounts receivable (P) Other comprehensive income Foreign exchange gain or loss Cash Foreign currency (P) Foreign currency option Foreign exchange gain or loss Other comprehensive income < Req A1 Req A2 > ✔ ✔ ✔ ✔ ✔ ♥ ✔ ✔ 00 00 00 ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Debit Credit
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