When a company uses put options to hedge foreign currency firm commitments, the accounting is relatively simple. The company records the cost of the option as an expense on its income statement. Then, when the contract expires, any difference between the strike price and the actual market price is recorded as a gain or loss on the income statement." Can you please illustrate the statement with an example of when the contract falls between two fiscal years?
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"When a company uses put options to hedge foreign currency firm commitments, the accounting is relatively simple. The company records the cost of the option as an expense on its income statement. Then, when the contract expires, any difference between the strike price and the actual market price is recorded as a gain or loss on the income statement."
Can you please illustrate the statement with an example of when the contract falls between two fiscal years?
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- A company is forecasting the purchase of inventory from an overseas vendor with payment to be made in a foreign currency (FC). Assume an option were used as a hedging instrument for this forecasted transaction. Explain how changes in the time value of the option would be measured and accounted for.Which one of the following statements is NOT correct? a) A repurchase agreement is the sale of a non-monetary asset together with an agreement to repurchase it a specified future date b) The difference between the price at which a commercial bank sells an asset to the central bank and the price at which it agrees to buy it back can be expressed as an annualized percentage of the selling price, and this is called the refinancing rate c) In the UK the refinancing rate is known as the repo rate d) If the central bank raises its refinancing rate then the commercial banks will try to increase their lendingWhich of the following statement is NOT true regarding the spot rate and forward rate? a. Forward rate can be calculated using the spot rate, the interest rate for domestic investment, and the foreign investment interest rate. b. Forward rate should be higher than the spot rate at the beginning of a forward contract. c. Forward rate is the rate of exchange at a future point in time. d. Spot rate is the current rate of exchange.
- A company makes an export sale denominated in a foreign currency and allows the customer one month to pay. Under the two-transaction perspective, accrual approach, how does the company account for fluctuations in the exchange rate for the foreign currency?dont use chat gpt Which of the following option is false? Select the most suitable answer. Select one: a. Forward contracts are popular in foreign exchange market. b. The value of short forward increases as the price of the asset decreases. c. A 1-year forward contract is an agreement where one counterparty has the obligation to buy an asset for the market price in 1-year time from the other counterparty. d. Forward contracts are not traded in any exchanges across the world. e. Forward contracts are negotiated before inception.The entity sold its inventory to a foreign entity with credit term of n/60. On the 60th day from invoice, the entity accepted the $200 payment from a client. It converted this amount on the spot rate. The entity's approach to the foreign exchange risk is A. AvoidanceB. MitigationC. Acceptance
- A spot contract is defined as: a. An agreement involving the exchange of an asset for cash at a fixed price in the future. b. An agreement involving the immediate exchange of an asset for cash. c. An agreement involving the future exchange of an asset for cash at a price that is determined daily. d. An agreement involving the immediate exchange of an asset for a foreign currency.One company agrees to pay to another company cash flows equal to interest at a predetermined fixed rate on a notional principal for a predetermined number of year in exchange of payments interest payments at a floating rate on the same notional principal for the same period of time. This is true for the following type of swap a. Total return swap b. Debt-equity swap c. Currency swap d. Interest rate swapWhich of the following statement is incorrect? *a. Trade payable are classified as current liabilities when they are expected to be settled within the normal operating cycle or one year, whichever is shorterb. Non-trade payables are classified as current liabilities only when they are expected to be settled within one yearc. Financial institutions need not classify their payables as trade or non-trade because their statement of financial position is presented based on liquidityd. A and B
- What is the relationship or link between the forward rate and the foreign currency option premium? An option's value declines over time, but it does not do it evenly. Explain what that means for option valuation? Classify the following as a transaction reported in a sub-component of the current account or the capital and financial accounts of the two countries involved: An American tourist pays for a hotel in Paris with his American Express card.Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.) Record the settlement of the forward contract. how do i record the settlement of the forward contract?Salm MOnammed AISaadi Identify the incorrect statement from the following: If there is a delay in the customer payment of a period more than three months then the receivable need to discounted to present values Noncash consideration can be part of contract as pér IFRS 15 The transaction price is not always set by the parties to the contract. In such case estimates can be used to determine transaction price. The transaction price may have variable consideration