Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

All information is present 1. ABC Company located in Norman, OK sells inventory to DEF Company located in Cabo San Lucas Mexico on December 1,

All information is present

image text in transcribed
1. ABC Company located in Norman, OK sells inventory to DEF Company located in Cabo San Lucas Mexico on December 1, 2017 for 100,000 pesos to be received on January 31, 2018. ABC Company enters into a forward contract on December 1, 2017 to sell 100,000 pesos on January 31, 2018. Relevant exchange rates for the pesos on various dates are as follows: Date Spot Rate Forward Rate (to January 31, 2018) December 1, 2017 061 .060 December 31, 2017 052 .062 January 31, 2018 057 n/a ABC Company's incremental borrowing rate is 12%. Present value factor for 1 period at 12% is .9901. Assume that ABC Company must close its books and prepare financial statements on December 31. A.1 Assume that ABC Company designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in US Dollars. A.2 What is the impact on 2017 net income? A.3 What is the impact on 2018 net income? B1. Assume that ABC Company designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in US Dollars. B.2 What is the impact on 2017 net income? B.3 What is the impact on 2018 net income

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Using Financial Accounting Information The Alternative to Debits and Credits

Authors: Gary A. Porter, Curtis L. Norton

7th Edition

978-0-538-4527, 0-538-45274-9, 978-1133161646

More Books

Students also viewed these Accounting questions

Question

What is the likelihood function for a logistic regression model?

Answered: 1 week ago