tequired A Reqiured B ssuming a spot rate of $0.048 per rupee on December 20, prepare all journal entries to account for the foreign currency otion, foreign currency firm commitment, and purchase of inventory. (If no entry is required for a transaction/event, select lo journal entry required" in the first account field.) No General Journal Date 11/20 11/20 12/20 12/20 Foreign currency option Cash No journal entry required Firm commitment Foreign exchange gain or loss Forpion Jone > 33 Debit 1,240 2,480 1.240 Credit 1,240 2,480
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- Amaretta Company (a U.S.-based company) ordered merchandise from a foreign supplier on November 20 at a price of 1,110,000 rupees when the spot rate was $0.050 per rupee. Delivery and payment were scheduled for December 20. On November 20, Amaretta acquired a call option on 1,110,000 rupees at a strike price of $0.050, paying a premium of $0.001 per rupee. The company designates the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. The option's time value is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income. The merchandise arrives, and Amaretta makes payment according to schedule. Amaretta sells the merchandise by December 31, when it closes its books. a. Assuming a spot rate of $0.053 per rupee on December 20, prepare all journal entries to account for the foreign currency option, foreign currency firm commitment,…On August 1, Ling-Harvey Corporation (a U.S.-based importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 ringgits. Ling-Harvey will receive and make payment for the merchandise in three months on October 31. On August 1, Ling-Harvey entered into a forward contract to purchase 400,000 ringgits in three months at a forward rate of $0.60. It properly designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate. Relevant exchange rates for the ringgit are as follows:Ling-Harvey’s incremental borrowing rate is 12 percent. The present value factor for one month at an annual interest rate of 12 percent (1 percent per month) is 0.9901. Ling-Harvey must close its books and prepare its third-quarter financial statements on September 30.a. Prepare journal entries for the forward contract and firm commitment through October 31.b.…On August 1, Ling-Harvey Corporation (a U.S.-based importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 ringgits. Ling-Harvey will receive and make payment for the merchandise in three months on October 31. On August 1, Ling-Harvey entered into a forward contract to purchase 400,000 ringgits in three months at a forward rate of $0.60. It properly designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate. Relevant exchange rates for the ringgit are as follows: Date Spot rate Forward rate ( to October 31) August 1 $0.60 $0.60 September30 0.63 0.66 October 31 0.68 N/A Ling-Harvey’s incremental borrowing rate is 12 percent. The present value factor for one month at an annual interest rate of 12 percent (1 percent per month) is 0.9901. Ling-Harvey must close its books and prepare its third-quarter financial…
- On August 1, Pure Joy Corporation (a U.S.-based Importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 pounds. Pure Joy will receive and make payment for the merchandise in three months on October 31. On August 1, Pure Joy entered into a forward contract to purchase 400,000 pounds in three months at a forward rate of $0.60 per pound. The company properly designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate and, therefore, forward points are included in assessing hedge effectiveness. Relevant U.S. dollar exchange rates for the pound are as follows: Date August 1 September 30 October 31 Spot Rate $ 0.60 0.63 0.68 Forward Rate (to October 31) $ 0.60 0.66 N/A Pure Joy must close its books and prepare its third-quarter financial statements on September 30. The merchandise is received and paid for on October 31 and sold…On August 1, Pure Joy Corporation (a U.S.-based importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 pounds. Pure Joy will receive and make payment for the merchandise in three months on October 31. On August 1, Pure Joy entered into a forward contract to purchase 400,000 pounds in three months at a forward rate of $0.60 per pound. The company properly designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Relevant U.S. dollar exchange rates for the pound are as follows: Date August 1 September 30 October 31 Spot Rate $ 0.60 0.63 0.68 Forward Rate (to October 31) $ 0.60 0.66 N/A Pure Joy must close its books and prepare its third-quarter financial statements on September 30. The merchandise is received and paid for on October 31 and…On August 1, Pure Joy Corporation (a U.S.-based importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 pounds. Pure Joy will receive and make payment for the merchandise in three months on October 31. On August 1, Pure Joy entered into a forward contract to purchase 400,000 pounds in three months at a forward rate of $0.60 per pound. The company properly designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Relevant U.S. dollar exchange rates for the pound are as follows: Date Spot Rate Forward Rate(to October 31) August 1 0.60 0.60 September 30 0.63 0.66 October 31 0.68 N/A Pure Joy must close its books and prepare its third-quarter financial statements on September 30. The…
- On August 1, Pure Joy Corporation (a U.S.-based importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 pounds. Pure Joy will receive and make payment for the merchandise in three months on October 31. On August 1, Pure Joy entered into a forward contract to purchase 400,000 pounds in three months at a forward rate of $0.60 per pound. The company properly designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Relevant U.S. dollar exchange rates for the pound are as follows: Date August 1 September 30 October 31 Spot Rate $ 0.60 0.63 0.68 Forward Rate (to October 31) $ 0.60 0.66 N/A Pure Joy must close its books and prepare its third-quarter financial statements on September 30. The merchandise is received and paid for on October 31 and…IJR Corp. imports cheese for distribution in the United States (US). On April 1, the corporation purchased cheese costing 100,000 Euro. Payment is due in Euro on August 1. The spot rate on April 1 was $1.20 per Euro, and on August 1, it was $1.25 per Euro. Determine the following: 1. 2. The company's liabilities in US Dollars prior to payment The amount of payment in US Dollars on August 1 Briefly discuss implications of the transaction.Doering Company, a U.S. corporation with customers in several foreign countries, had the following selected transactions for 2019 and 2020. 2019 Apr. 8 Sold merchandise to Salinas & Sons of Mexico for $5,938 cash. The exchange rate for pesos is $0.1043 on this day. July 21 Sold merchandise on credit to Sumito Corp. in Japan. The price of 1.5 million yen is to be paid 120 days from the date of sale. The exchange rate for yen is $0.0094 on this day. Oct. 14 Sold merchandise for 19,000 pounds to Smithers Ltd. of Great Britain, payment in full to be received in 90 days. The exchange rate for pounds is $1.4566 on this day. Nov. 18 Received Sumito’s payment in yen for its July 21 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $0.0092 on this day. Dec. 20 Sold merchandise for 17,000 ringgits to Hamid Albar of Malaysia, payment in full to be received in 30 days. On this day, the exchange rate for ringgits is $0.4501. Dec. 31 Recorded adjusting entries…
- On March 1, Pimlico Corporation (a U.S.-based company) expects to order merchandise from a supplier in Sweden in three months. On March 1, when the spot rate is $0.10 per Swedish krona, Pimlico enters into a forward contract to purchase 500,000 Swedish kroner at a three-month forward rate of $0.12. At the end of three months, when the spot rate is $0.115 per Swedish krona, Pimlico orders and receives the merchandise, paying 500,000 kroner. What amount does Pimlico report in net income as a result of this cash flow hedge of a forecasted transaction?a. $10,000 premium expense plus a $7,500 positive adjustment to net income when the merchandise is purchased.b. $10,000 Discount expense plus a $5,000 positive adjustment to net income when the merchandise is purchased.c. $2,500 premium expense plus a $5,000 negative adjustment to net income when the merchandise is purchased.d. $2,500 premium expense plus a $2,500 positive adjustment to net income when the merchandise is purchased.On June 1, Vandervelde Corporation (a U.S.-based manufacturing firm) received an order to sell goods to a foreign customer at a price of 100,000 leks. Vandervelde will ship the goods and receive payment in three months on September 1. On June 1, Vandervelde purchased an option to sell 100,000 leks in three months at a strike price of $1.00. It properly designated the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. Relevant exchange rates and option premiums for the lek are as follows:Vandervelde’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Vandervelde Corporation must close its books and prepare its second-quarter financial statements on June 30.a. Prepare journal entries for the foreign currency option and firm commitment.b. What is the impact on net income over…On June 1, Vandervelde Corporation (a U.S.-based manufacturing firm) received an order to sell goods to a foreign customer at a price of 100,000 leks. Vandervelde will ship the goods and receive payment in three months on September 1. On June 1, Vandervelde purchased an option to sell 100,000 leks in three months at a strike price of $1.00. It properly designated the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. Relevant exchange rates and option premiums for the lek are as follows: Date Spot Rate Put option premium for September 1 (strike price $1.00) June 1 $1.00 $0.020 June 30 0.94 0.028 September1 0.88 N/A Vandervelde’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Vandervelde Corporation must close its books and prepare its second-quarter financial…