Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Question
Chapter 10, Problem 4.1E
To determine
Forward Contract: Forward contract is the contract entered by two private parties to buy/sell a given commodity, foreign currency at a specified rate.
Fair Value Hedge: Fair value hedge accounting is accounting for hedges based on changes in fair value of assets or liabilities.
To prepare: The
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The following information are the import transaction between Peerless Products and Tokyo
Industries:
On August 1, 20X1, Peerless contracts to purchase special-order goods from Tokyo
Industries. Their manufacture and delivery will take place in 60 days (on October 1, 20X1).
The contract price is 2,000,000 yen..
Timing USD/YEN
Hedge Commencement 0.0065
30 days later (first reporting date) 0.0075
• 60 days later (purchase takes place and the payment is made) 0.0070
Required: prepare the journal entry based on the given information
Please help me
Spitz Company ordered merchandise from a foreign supplier on November 20 at a price of 100,000 forints when the spot rate was $0.50 per forint. Delivery and payment were scheduled for December 20. On November 20, Spitz acquired a call option on 100,000 forints at a strike price of $0.50, paying a premium of $0.01 per forint. It 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 merchandise arrives and Spitz makes payment according to schedule. Spitz sells the merchandise by December 31, when it closes its books.a. Assuming a spot rate of $0.53 per forint on December 20, prepare all journal entries to account for the foreign currency option, foreign currency firm commitment, and purchase of inventory.b. Assuming a spot rate of $0.48 per forint on December 20, prepare all journal entries to account for the foreign currency option, foreign currency firm…
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