Monument Company (a U.S.-based company) ordered a machine costing €150,000 from a foreign supplier on January 15, w
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Monument Company (a U.S.-based company) ordered a machine costing €150,000 from a foreign supplier on January 15, when the spot rate was $1.19 per €. A one-month forward contract was signed on that date to purchase €150,000 at a forward rate of $1.21. The forward contract is properly designated as a fair value hedge of the €150,000 firm commitment. On February 15, when the company receives the machine, the spot rate is $1.20. At what amount should Monument Company capitalize the machine on its books?
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$29,000
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$181,500
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$178,500
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$180,000
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- Lawrence Company, a U.S. company, ordered parts costing 1,000,000 Thailand bahts from a foreign supplier on July 7 when the spot rate was $0.025 per baht. A one-month forward contract was signed on that date to purchase 1,000,000 bahts at a rate of $0.027. The forward contract is properly designated as a fair value hedge of the 1,000,000 baht firm commitment. On August 7, when the parts are received, the spot rate is $0.028. What is the amount of accounts payable that will be paid at this date? Multiple Choice $27,000. $20,100. $28,000. $25,000. $20,000.Monument Company (a U.S.-based company) ordered a machine costing €200,000 from a foreign supplier on January 15, when the spot rate was $1.11 per €. A one-month forward contract was signed on that date to purchase €200,000 at a forward rate of $1.13. The forward contract is properly designated as a fair value hedge of the €200,000 firm commitment. On February 15, when the company receives the machine, the spot rate is $1.12. At what amount should Monument Company capitalize the machine on its books? $222,000 $226,000 $224,000 $23,000On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.33 per Norwegian krone, Derby enters into a forward contract to purchase 635,000 Norwegian kroner at a three-month forward rate of $0.360. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.351 per Norwegian krone, Derby orders and receives the merchandise, paying 635,000 kroner. The merchandise is sold within 30 days. What amount(s) does Derby report in net income as a result of this cash flow hedge of a forecasted transaction and the related purchase and sale of merchandise? Multiple Choice Cost of goods sold of $222,885 plus foreign exchange loss of $5,715 Cost of goods sold of $228,600 less foreign exchange gain of $19,050 Cost of goods sold of $209,550…
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- On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.45 per Norwegian krone, Derby enters into a forward contract to purchase 527,500 Norwegian kroner at a three-month forward rate of $0.490. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.482 per Norwegian krone, Derby orders and receives the merchandise, paying 527,500 kroner. The merchandise is sold within 30 days. What amount(s) does Derby report in net income as a result of this cash flow hedge of a forecasted transaction and the related purchase and sale of merchandise? Cost of goods sold of $254,255 plus foreign exchange loss of $4,220 Cost of goods sold of $258,475 Cost of goods sold of $237,375 plus foreign exchange loss of $21,100 Cost of goods…On October 5th, Excelsior Corporation, a U.S. company, placed an order for 20,000 units from Shanghai, Inc. in China. The cost of the order was 2,000,000 yuan when the spot rate was $.015. To minimize the exchange rate risk, Excelsior entered into a forward contract to purchase 2,000,000 yuan at a rate of .018. This forward contract meets the criteria to be designated as a fair value hedge. On November 15 ^ (th) Excelsior received the 20,000 units. At that time, the spot rate was $.020. On December 10 th Excelsior paid Shanghai 2,000,000 yuan, when the spot rate was $.017, What amount will Excelsior recognize as a net gain/ loss with respect to this transaction ? Select one: a. $6,000 gain b. There is no gain or loss because the forward contract serves as a hedge against this transaction. c. $4,000 gain d. $6,000 loss e. $4,000 lossOn June 1, Parker-Mae Corporation (a U.S.-based company) received an order to sell goods to a foreign customer at a price of 165,000 francs. Parker-Mae will ship the goods and receive payment in three months, on September 1. On June 1, Parker-Mae purchased an option to sell 165,000 francs in three months at a strike price of $1.04. The company designated the option as a fair value hedge of a foreign currency firm commitment. The option's time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income. The fair value of the firm commitment is measured by referring to changes in the spot rate (discounting to present value is ignored). Relevant exchange rates and option premiums for the franc are as follows: Date Spot Rate Put Option Premiumfor September 1(strike price $1.04) June 1 1.04 0.020 June 30 0.98 0.072 September 1 0.93 N/A Parker-Mae Corporation must close its books…
- On June 1, Parker-Mae Corporation (a U.S.-based company) received an order to sell goods to a foreign customer at a price of 100,000 francs. Parker-Mae will ship the goods and receive payment in three months, on September 1. On June 1, Parker-Mae purchased an option to sell 100,000 francs in three months at a strike price of $1.00. The company designated the option as a fair value hedge of a foreign currency firm commitment. The option's time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income. The fair value of the firm commitment is measured by referring to changes in the spot rate (discounting to present value is ignored). Relevant exchange rates and option premiums for the franc are as follows: Date June 1 June 30 September 1 Spot Rate $1.00 0.94 0.90 Put Option Premium for September 1 (strike price $1.00) $ 0.020 0.072 N/A Parker-Mae Corporation must close its books and prepare its second-quarter financial statements on June…A U.S. firm exports products to a German firm and will receive payment of €200,000 in three months. On June 1, the spot rate of the euro was $1.12, and the 3-month forward rate was $1.10. On June 1, the firm negotiated a forward contract with a bank to sell €200,000 forward in three months. The spot rate of the euro on September 1 is $1.15. the firm will receive $_______ for the euros. 224,000 230,000 220,000 200,000On 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…