ACCOUNTING FOR BUSINESS COMBINATION

ANSWER THE FOLLOWING AND PROVIDE STEP-BY-STEP EXPLANATION:

Problem 3 (Exposed Asset Position) On December 1, 2009, Baguio Company sold fumiture to Saudi Company. The purchase price of 100,000 Rial is payable in Rial on March 1, 2010. To hedge this foreign currency exposure, Baguio Company sold 100,000 Rial for delivery on March 1, 2010. The following exchange rates applied: Spot Rate Forward Rate December 1, 2009 P12.80 P12.40 (90-day) December 31, 2009 (fiscal year-end) 12.70 12.60 (60-day) March 1, 2010 12. 90 12.60 Required: Prepare journal entries to record the events on Baguio Company's books.Problem 4 (Exposed Liability Position) On June 1, 2009, Kohl Corporation purchased calculators worth 1,000,000 Yen from the Japanese Company, payable on August 1, 2009. To hedge this foreign currency exposure, Kohl Corporation bought 1,000,000 Yen on June 1, 2009 for delivery on August 1, 2009. The following exchange rates applied: June 1, 2009 60-day forward rate V1 = P.48 Spot rate *1 = P.46 June 30, 2009 30-day forward rate *1 = P.50 Spot rate *1 = P.48 August 1, 2009 Spot rate *1 = P.51 Required: Prepare all necessary journal entries to record the above transactions on the books of Kohl Corporation