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ACC450 Unit 7 Assignment

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Question;Problem 9-24 [LO2]On December 20, 2013, Butanta Company (a U.S. company headquartered in Miami, Florida) sold parts to a foreign customer at a price of 115,000 ostras. Payment is received on January 10, 2014. Currency exchange rates for 1 ostra are as follows: December 20, 2013 $ 1.21 December 31, 2013 1.18 January 10, 2014 1.14 ________________________________________a. How does the fluctuation in exchange rates affect Butanta?s 2013 income statement? (Input the amount as a positive value.) The ostra receivable in dollar value, resulting in a foreign exchange of $ in 2013.b. How does the fluctuation in exchange rates affect Butanta?s 2014 income statement? (Input the amount as a positive value.) The ostra receivable in dollar value, resulting in a foreign exchange of $ in 2014.Problem 9-27 [LO2]Acme Corporation (a U.S. company located in Sarasota, Florida) has the following import/export transactions in 2013:March 1 Bought inventory costing 59,000 pesos on credit.May 1 Sold 80 percent of the inventory for 54,000 pesos on credit.August 1 Collected 44,500 pesos from customers.September 1 Paid 34,500 pesos to creditors.Currency exchange rates for 1 peso for 2013 are as follows: March 1 $ 0.18 May 1 0.19 August 1 0.20 September 1 0.21 December 31 0.22 ________________________________________Assume that all receipts were converted into dollars as soon as they were received.For each of the following accounts, how much will Acme report on its 2013 financial statements? a. Inventory $ b. Cost of goods sold $ c. Sales $ d. Accounts receivable $ e. Accounts payable $ f. Cash $ Problem 9-31 [LO4]Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2013, with payment of 15,000 korunas to be received on March 1, 2014. Brandlin enters into a forward contract on December 1, 2013, to sell 15,000 korunas on March 1, 2014. Relevant exchange rates for the koruna on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2014) December 1, 2013 $ 2.60 $ 2.675 December 31, 2013 2.70 2.800 March 1, 2014 2.85 N/A ________________________________________Brandlin'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. Brandlin must close its books and prepare financial statements at December 31.a-1. Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars. (Leave no cells blank. If no entry is required, select "No Journal Entry Required" in the account field and zero (0) in the amount field. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)Date General Journal Debit Credit12/1/13 To record the sales. To record the forward contract. 12/31/13 To record foreign exchange gain. To record forward contract as a liability. To record loss on forward contract. To allocate forward contract premium revenue. 3/1/14 To record foreign exchange gain. To record forward contract as a liability. To record loss on forward contract. To allocate forward contract premium revenue. To record receipt. To record settlement of the forward contract. ________________________________________a-2. What is the impact on 2013 net income? (Do not round intermediate calculations.) Impact on 2013 income $ a-3. What is the impact on 2014 net income? (Do not round intermediate calculations.) Impact on 2014 income $ a-4. What is the impact on net income over the two accounting periods? (Do not round intermediate calculations.) Impact on net income $ b-1. Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars. (Leave no cells blank. If no entry is required, select "No Journal Entry Required" in the account field and zero (0) in the amount field. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)Date General Journal Debit Credit12/1/13 To record the sales. To record the forward contract. 12/31/13 To record foreign exchange gain. To record loss on forward contract. 3/1/14 To record foreign exchange gain. To record loss on forward contract. To record receipt. To record settlement of the forward contract. ________________________________________b-2. What is the impact on 2013 net income? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Impact on 2013 income $ b-3. What is the impact on 2014 net income? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Impact on 2014 income $ b-4. What is the impact on net income over the two accounting periods? (Do not round intermediate calculations.) Impact on net income $ Problem 9-40 [LO5]Big Arber Company ordered parts from a foreign supplier on November 20 at a price of 62,000 pijios when the spot rate was $0.21 per pijio. Delivery and payment were scheduled for December 20. On November 20, Big Arber acquired a call option on 62,000 pijios at a strike price of $0.21, paying a premium of $0.004 per pijio. 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 parts arrive and Big Arber makes payment according to schedule. Big Arber does not close its books until December 31.a. Assuming a spot rate of $0.22 per pijio on December 20, prepare all journal entries to account for the option and firm commitment. (Leave no cells blank. If no entry is required, select "No Journal Entry Required" in the account field and zero (0) in the amount field.)Date General Journal Debit Credit 11/20 To record purchase of foreign currency option. To record the purchase agreement. 12/20 To record firm commitment loss. To record gain on foreign currency option. To record exercise the foreign currency option. To record purchase of inventory parts. To close firm commitment. ________________________________________b. Assuming a spot rate of $0.19 per pijio on December 20, prepare all journal entries to account for the option and firm commitment. (Leave no cells blank. If no entry is required, select "No Journal Entry Required" in the account field and zero (0) in the amount field.)Date General Journal Debit Credit 11/20 To record foreign currency option. To record the purchase agreement. 12/20 To record gain on firm commitment. To record loss on foreign currency option. To record payment. To record purchase of inventory parts. To close firm commitment. ________________________________________Problem 10-25 [LO3]Fenwicke Company began operating a subsidiary in a foreign country on January 1, 2013, by acquiring all of its common stock for LCU 66,000, which was equal to fair value. This subsidiary immediately borrowed LCU 165,000 on a five-year note with 5 percent interest payable annually beginning on January 1, 2014. The subsidiary then purchased for LCU 231,000 a building that had a 10-year anticipated life and no salvage value and is to be depreciated using the straight-line method. The subsidiary rents the building for three years to a group of local doctors for LCU 4,000 per month. By year-end, payments totaling LCU 40,000 had been received. On October 1, LCU 3,700 was paid for a repair made on that date. The subsidiary transferred a cash dividend of LCU 5,200 back to Fenwicke on December 31, 2013. The functional currency for the subsidiary is the LCU. Currency exchange rates for 1 LCU follow: January 1, 2013 $ 2.20 = 1 LCU October 1, 2013 2.05 = 1 Average for 2013 2.10 = 1 December 31, 2013 2.00 = 1 ________________________________________Prepare an income statement, statement of retained earnings, and balance sheet for this subsidiary in LCU and then translate these amounts into U.S. dollars. (Be sure to list assets and liabilities in the order of liquidity. Amounts to be deducted and losses should be indicated with minus sign. Leave no cells blank - be certain to enter "0" wherever required. Enter the expense amounts in the order mentioned.)Fenwicke Company's SubsidiaryIncome Statement LCU U.S. Dollars ________________________________________ ________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________Statement of Retained Earnings LCU U.S. Dollars Retained earnings, 1/1 ________________________________________ ________________________________________ Retained earnings, 12/31 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________Balance Sheet LCU U.S. Dollars ________________________________________ ________________________________________ Total assets ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ ________________________________________ Total liabilities and equities ________________________________________________________________________________ ________________________________________Problem 10-28 [LO3, LO4]Aerkion Company starts 2013 with two assets: cash of 23,500 LCU (local currency units) and land that originally cost 80,000 LCU when acquired on April 4, 2005. On May 1, 2013, Aerkion rendered services to a customer for 24,000 LCU, an amount immediately paid in cash. On October 1, 2013, the company incurred an 13,200 LCU operating expense that was immediately paid. No other transactions occurred during the year. Currency exchange rates for 1 LCU follow: April 4, 2005 LCU 1 = $ 0.26 January 1, 2013 1 = 0.27 May 1, 2013 1 = 0.28 October 1, 2013 1 = 0.29 Average for 2013 1 = 0.30 December 31, 2013 1 = 0.33 ________________________________________a. Assume that Aerkion is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the LCU is the subsidiary?s functional currency. What is the translation adjustment for this subsidiary for the year 2013? (Input the amount as a positive value.) translation adjustment $ b. Assume that Aerkion is a foreign subsidiary of a U.S. multinational company that uses the U.S. dollar as its reporting currency. Assume also that the U.S. dollar is the subsidiary?s functional currency. What is the remeasurement gain or loss for 2013? (Input the amount as a positive value.) Remeasurement $ c. Assume that Aerkion is a foreign subsidiary of a U.S. multinational company. On the December 31, 2013, balance sheet, what is the translated value of the Land account? On the December 31, 2013, balance sheet, what is the remeasured value of the Land account? Translated value of land $ Remeasured value of land $ Problem 10-29 [LO3, LO4]Lancer, Inc., starts a subsidiary in a foreign country on January 1, 2012. The following account balances for the year ending December 31, 2013, are stated in kanquo (KQ), the local currency: Sales KQ 290,000 Inventory (bought on 3/1/13) 159,500 Equipment (bought on 1/1/12) 78,000 Rent expense 18,000 Dividends (paid on 10/1/13) 26,000 Notes receivable (to be collected in 2016) 45,000 Accumulated depreciation?equipment 23,400 Salary payable 6,800 Depreciation expense 7,800 ________________________________________The following exchange rates for $1 are applicable: January 1, 2012 28 KQ January 1, 2013 33 March 1, 2013 34 October 1, 2013 36 December 31, 2013 37 Average for 2012 29 Average for 2013 35 ________________________________________Lancer is preparing account balances to produce consolidated financial statements.a. Assuming that the kanquo is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?Account Exchange Rate Sales Inventory Equipment Rent expense Dividends Notes receivable Accumulated depreciation?equipment Salary payable Depreciation expense ________________________________________b. Assuming that the U.S. dollar is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?Account Exchange Rate Sales Inventory Equipment Rent expense Dividends Notes receivable Accumulated depreciation?equipment Salary payable Depreciation expense Problem 10-30 [LO3, LO5]Board Company has a foreign subsidiary that began operations at the start of 2013 with assets of 142,000 kites (the local currency unit) and liabilities of 74,000 kites. During this initial year of operation, the subsidiary reported a profit of 36,000 kites. It distributed two dividends, each for 6,000 kites with one dividend paid on March 1 and the other on October 1. Applicable exchange rates for 1 kite follow: January 1, 2013 (start of business) $ 0.79 March 1, 2013 0.77 Weighted average rate for 2013 0.76 October 1, 2013 0.75 December 31, 2013 0.74 ________________________________________a. Assume that the kite is this subsidiary?s functional currency. What translation adjustment would Board report for the year 2013? (Input the amount as a positive value.) Translation adjustment $ b. Assume that on October 1, 2013, Board entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, Board agreed to sell 150,000 kites in three months at a forward exchange rate of $0.75/1 kite. Prepare the journal entries required by this forward contract. (Leave no cells blank. If no entry is required, select "No Journal Entry Required" in the account field and zero (0) in the amount field.)Date General Journal Debit Credit10/1 Board entered into a forward exchange contract. 12/31 To record the change in the value. To record the purchase. To record delivery. ________________________________________c. Compute the net translation adjustment for Board to report in Accumulated Other Comprehensive Income for the year 2013 under this second set of circumstances. (Input the amount as a positive value.) Net translation adjustment $

 

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