Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it. The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

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Answer 1

Question

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

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Beresford Inc. purchased several investments in debt securities during 2020, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent. Held-to-Maturity Fair Value Fair Value Amortized Cost Amortized Cost Securities: 12/31/2020 12/31/2021 12/31/2020 12/31/2021 АВС Со. Вonds $385,000 $410,000 $377, 500 $370, 000 Fair Value Fair Value Trading Securities: 12/31/2021 $ 66,000 $ 87,000 $ 48,500 12/31/2020 Cost DEF Co. Bonds $ 55,000 $ 57,000 $ 54,000 $ 69,100 $ 49,000 $ 42,900 GEH Inc. Bonds IJK Inc. Bonds Available-for-Sale Fair Value Fair Value Cost 12/31/2020 $147,400 Securities: 12/31/2021 LMN Co. Bonds $161,900 $150, 000 What balance sheet amount would Beresford report for the total of its investments in bonds at 12/31/2020?

Example 2) Fair value through profit or loss: Debt investment ABC Co. had the following transactions pertaining its trading investments: Feb. 1, 2021 Purchased $200,000 of 3-year, 6% bonds at 104. Interest is payable on each August 1 and February 1. Aug. 1, 2021 Received interest on the bonds. Dec. 31, 2021 The fair value of the bonds was 100. Instruction: Record the above transactions, using the fair value through profit or loss model. Also, prepare any required adjusting entry/entries at December 31, 2021. ABC Co. has a December 31 year-end.

At December 31, 2022, available-for-sale debt securities for Pharoah, Inc. are as follows. The securities are considered to be a long-term investment. Security (a) A B C Total Cost $16,985 12,930 21,760 $51,675 Fair Value $16.030 15,179 18,160 $49,369 Prepare the adjusting entry at December 31, 2022, to report the securities at fair value. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Dec. 31 Debit Credit

Answer 2

Question

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

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Answer 3

Question

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

Expert Solution & Answer

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Answer 4

Question

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

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Answer 5

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

Answer 6

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

Answer 7

Chapter 11, Problem 11.31BP

a.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record purchase of bonds and put option by P company as on November 3, 20X2.

Answer 8

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

Answer 9

b.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record change in intrinsic value and time value of put option as well as change in value of securities at sale.

Answer 10

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

Answer 11

c.

To determine

Introduction: Hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc. Hedging involves derivatives such as options, futures, etc.Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.

The Journal entry to record the exercise of put option and sale of securities held at sale.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 11 - Prob. 11.1Q Ch. 11 - Prob. 11.2Q Ch. 11 - The U.S. dollar strengthened against the European...Ch. 11 - Prob. 11.4Q Ch. 11 - Prob. 11.5Q Ch. 11 - How are assets and liabilities denominated in a...Ch. 11 - Prob. 11.7Q Ch. 11 - Prob. 11.8Q Ch. 11 - Prob. 11.9Q Ch. 11 - Distinguish between an exposed net asset position...

Solution Summary: The author explains that hedging is the strategy to manage the investment risk by taking the opposite position in the related assets such as shares, bonds, etc.

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