1. On December 16, 2022, JJ Co. sold goods to a Korean firm for 5,000,000 won. JJ Co. was concerned about the fluctuation in the Korean currency so on this date, JJ co. entered into a 30-day forward contract to sell 5,000,000 won for P2,100,000 at a forward rate of P0.42.

Relevant rates are shown below:
                                              Spot rate           Forward rate  
December 16, 2022                   0.43                      0.42
December 31, 2022                   0.44                      0.45
January 15, 2022                       0.42                      0.40

How much is the forex gain/loss on foreign currency transaction on December 31, 2022?

(for question number 2 to 5)

Cebu Corporation acquired merchandise from a US supplier for USD$45,000 on October 1, 2021.
Also on the same date, Cebu Corporation sold merchandise to a US customer for USD$90,000.
Both foreign currency denominated transactions of Cebu Corporation are to be settled on February
28, 2022.
The following rates were available:
                                              Bid Rate                Offer Rate
October 1, 2021          US$1 = P46.00        P1 = $.021505
December 31, 2021    US$1 = P45.80        P1 = $.021277
February 28, 2022       US$1 = P46.20        P1 = $.022222

 

2. Compute the amount of Sales Revenue recognized on December 31, 2021

 

3. Compute the reportable amount of the exposed liability on December 31, 2021

4. Compute the reportable amount of the exposed asset on December 31, 2021
 

5. Compute the total/net FOREX gain/loss for the year 2022

 

 

(for question number 6 and 7)

DIGGIE Company operates a seafood restaurant. On October 1, 2021, the entity determined that it will need to purchase 40,000 kilos of deluxe fish on March 1, 2022.

Because of the volatile fluctuation in the price of deluxe fish, on October 1, 2021, the entity negotiated a forward contract with a reputable bank to purchase 40,000 kilos of deluxe fish on March 1, 2022 at a price of P40 per kilo or P1,600,000. This forward contract was designated as Cash Flow Hedge.

The derivative forward contract provides that if the market price of deluxe fish on March 1, 2022 is more than P40, the difference is paid by the bank to the entity.

On the other, if the market price on March 1, 2022 is less than P40, the entity will pay the difference to the bank.

On December 31, 2021, the market price per kilo is P50 and on March 1, 2022, the market price is P48.

The discount rate is 8%. The present value of 1 at 8% for one period is .93.

6. What is the fair value of the derivative asset or liability on December 31, 2021?

 

7. What is the fair value of the derivative asset or liability on March 1, 2022?

 

 

8. Hall, Inc. enters into a call option contract with Bennett Investment Co. on December 2, 2022. This contract gives Hall the option to purchase 1,000 shares of WSM stock at P50 per share. The option expires on April 30, 2023. WSM shares are trading at P50 per share on December 2, 2022, at which time Hall pays P600 for the call option.

The entity designated the call option as Cash Flow Hedge.

If the fair value of the shares on December 31, 2022 is P60, and P62 on April 30, 2023, what amount should the call option be reported at 2022? What amount of gain/loss should be recorded in 2023 regarding Option Contract?