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Question;8.;Wolters Corporation is a U.S. corporation that;purchased 50,000 chocolate bars from a foreign manufacturer on March 1, 20X9;for 80,000 foreign currency units, to be paid on April 30, 20X9. On March 1;20X9 Wolters also entered into a forward contract to purchase 80,000 foreign;currency units on April 30, 20X9. Wolters has a December 31 year end.;Exchange rates are as;follows;Date;Spot Rate;Forward;Rate;3/1/X9...................................;$0.69;$0.65;3/31/X9..................................;$0.61;$0.65;4/30/X9..................................;$0.66;$0.66;10-15;Chapter 10;Required;Prepare the journal entries to record the transactions through;April 30, 20X9. March 31 is NOT a fiscal period end. Ignore the split between;spot gain/loss and time value.;9.;Describe the disclosures required by the FASB of;firms using derivatives as foreign currency hedges.;DIF: M OBJ: 5;10-16;Chapter 10;10.;Rex Corporation, a U.S. firm with a calendar;accounting year, agreed to buy a specially made truck from a Japanese firm for;delivery on January 31, 20X2 with payment due on 2/28/X2. On the same date the;agreement was signed, November 1, 20X1, a forward contract due on February 28;20X2, was also signed to purchase 1,000,000 yen, the contract price of the;truck. Exchange rates were as follows;Date;Spot Rate;Forward;Rate;11/1/X1................................;$0.0076;$0.0078;12/31/X1................................;$0.0081;$0.0080;1/31/X2................................;$0.0084;$0.0083;2/28/X2................................;$0.0085;$0.0085;Discount rate = 8%;Required;Prepare the;journal entries needed to properly reflect the purchase and forward contract;through the end of the fiscal year.;11.;On January 1, 20X1, a domestic firm agrees to sell;goods to a foreign customer, with delivery to be made on March 1, 20X1. The;goods, valued at 50,000 FCs, are to be paid for 30 days after delivery. On;January 1, 20X1, the domestic firm purchased a 90-day forward contract to sell;50,000 FCs. Exchange rates on selected dates are as follows;Date;Spot;Rate;Fwd Rate;1/1/X1.................................;1;FC =;$1.00;1FC;= $0.99;3/1/X1.................................;1;FC =;$0.98;1FC =;$0.97;4/1/X1.................................;1;FC =;$0.96;1FC = $0.96;Discount rate = 10%;Required;Prepare the;journal entries needed to properly reflect the sales transaction and the;forward exchange contract. The forward contract meets the conditions necessary;to be classified as a hedge on an identifiable foreign currency commitment.;Include the table to calculate the split between exchange gains or losses on;the contract due to changes in spot rates and the changes in time value.;10-18;Chapter 10;10-19;Chapter 10;12.;Wolters Corporation is a U.S. corporation that;purchased 50,000 chocolate bars from a foreign manufacturer on 6/1/X9 for;80,000 foreign currency units, to be paid on 9/1/X9. On 6/1/X9 Wolters also;entered into a forward contract to purchase 80,000 foreign currency units on;9/1/X9. Wolters has a July 31 year end.;Exchange;rates are as follows;Date;Spot Rate;Fwd;Rate;6/1/X9..................................;$0.64;$0.645;7/31/X9.................................;$0.66;$0.68;9/1/X9..................................;$0.69;$0.69;Discount rate = 12%;Required;Make the;necessary journal entries for Wolters for the period June 1 through September;1, 20X9.;13.;Lion Corporation, a U.S. firm, entered into several;foreign currency transactions during the year. Determine the effect of each;transaction on net income for that current accounting year only. Bear has a;June 30 year end.;Required;a.;On January 15, Lion sold $30,000 (Canadian) in;merchandise to a Canadian firm, to be paid for on February 15 in Canadian;dollars. Canadian dollars were worth $0.85 (U.S.) on January 15 and $0.82;(U.S.) on February 15.;b.;On June 1, Lion purchased and received a computer;costing 100,000 euros from a German firm. Bear paid for the computer on August;1. On June 1, to reduce exchange risks, Lion;purchased a;contract to buy 100,000 marks in 60 days. Exchange rates are as follows;6/1;Spot;Fwd;$0.53;$0.60;6/30;$0.54;$0.58;Discount rate = 6%;c.;On June 1, Lion purchased an option to sell 100,000;FC in 60 days to hedge a forecasted sale to a customer. The option sold for a;premium of $6,500 and a strike price of $1.20. The value of the option 6/30 was;$12,500. The spot rate on 6/1 was $1.19 and at 6/30 $1.25.;10-21;Chapter 10;14.;Differentiate between the following monetary;systems: floating system, controlled float system and tiered system.

 

Paper#44395 | Written in 18-Jul-2015

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