Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
Amaretta Company ( a U . S . - based company ) ordered merchandise from a foreign supplier on November 2 0 at a price
Amaretta Company a USbased company ordered merchandise from a foreign supplier on November at a price of rupees when the spot rate was $ per rupee. Delivery and payment were scheduled for December On November Amaretta acquired a call option on rupees at a strike price of $ paying a premium of $ per rupee. The company designates the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. The options time value is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income. The merchandise arrives, and Amaretta makes payment according to schedule. Amaretta sells the merchandise by December when it closes its books. Required: Assuming a spot rate of $ per rupee on December prepare all journal entries to account for the foreign currency option, foreign currency firm commitment, and purchase of inventory. Assuming a spot rate of $ per rupee on December prepare all journal entries to account for the foreign currency option, foreign currency firm commitment, and purchase of inventory.
Amaretta Company a USbased company ordered merchandise from a foreign supplier on November at a price of rupees when the spot rate was $ per rupee. Delivery and payment were scheduled for December On November Amaretta acquired a call option on rupees at a strike price of $ paying a premium of $ per rupee. The company designates the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. The options time value is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income. The merchandise arrives, and Amaretta makes payment according to schedule. Amaretta sells the merchandise by December when it closes its books.
Required:
Assuming a spot rate of $ per rupee on December prepare all journal entries to account for the foreign currency option, foreign currency firm commitment, and purchase of inventory.
Assuming a spot rate of $ per rupee on December prepare all journal entries to account for the foreign currency option, foreign currency firm commitment, and purchase of inventory.
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