Question
1- Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be
1- Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied:
DateSpot RateForward Rate to Jan.15December 16, 2021$0.00082 $0.00089 December 31, 2021 0.00080 0.00083 January 15, 2022 0.00086 0.00086
Assuming a forward contract was not entered into, what would be the net impact on Jackson Corp.'s 2021 income statement related to this transaction?
Multiple Choice
- $600 (gain).
- $600 (loss).
- $400 (gain).
- $400 (loss).
- $0
2- Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied:
DateSpot RateForward Rate to Jan.15December 16, 2021$0.00082 $0.00089 December 31, 2021 0.00080 0.00083 January 15, 2022 0.00086 0.00086
Assuming a forward contract was entered into on December 16 as a fair value hedge, what would be the net foreign exchange gain or loss on Jackson's 2021 income statement related to this transaction? Jackson amortizes forward points using the straight-line method. Ignore present values.
Multiple Choice
- $0 (no impact).
- $200 (loss).
- $600 (gain).
- $800 (loss).
- $700 (gain).
3- On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.41 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.36. At the end of three months, the spot rate is $1.37 per euro, and Quality delivers the merchandise, collecting 400,000 euros. What amount will Quality recognize in Sales from these transactions?
Multiple Choice
- $0.
- $400,000.
- $544,000.
- $548,000.
- $564,000.
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