Question
1. Maverik Co has debited its Other Comprehensive Income - Swap account. The most likely explanation for this debit is: Group of answer choices A
1. Maverik Co has debited its Other Comprehensive Income - Swap account. The most likely explanation for this debit is:
Group of answer choices
A pension cost for employee service earned in annually in the company defined benefit plan
A loss on the sale of property, plant and equipment that was hedged using commodities futures (derivatives)
A corresponding decrease in the derivative swap asset that is used to hedge cash flow risk for interest
The impact of a weather derivative used to offset losses in amusement park income on rainy days
2.
Which of the following is not one of the conditions that must be met under GAAP for a company to utilize hedge accounting treatment?
Group of answer choices
The swap term must be under 10 years and 90% fair value of the underlying.
The derivative is utilized to hedge either fair value exposure to foreign exchange risk or cash flow exposure.
The derivative is tested and found to be highly effective in offsetting the changes in the cash flows or fair value relative to the hedged item
The company has documented its hedge effectiveness testing and ability to meet the GAAP requirements for hedging.
3.
The change in fair value for an interest rate swap that is used by Maverik Co. to hedge cash flow risk is recorded as an increase or decrease to which of the following accounts?
Group of answer choices
Long-term debt
Deferred loan costs
Derivative asset or liability
Other retained earnings
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started