Computation of Exchange Gain or Loss, Exposed Positions and Forward Contracts In ternational Distributors, Inc., a U.S. company, is active in the import/export business. An analysis of International's receivables, payables, and other assets (liabilities) prior to adjustment at December 31 2020, disclosed the following P8.4 Receivables U.S. customers.... 100,000 Belgian customers (300,000 euros) Indian customers (1,200,000 rupees) Saudi Arabian customers (90,000 riyal) 355,000 19,500 23,000 497,500 Total receivables.. Payables U.S. suppliers.. Japanese suppliers (1,000,000 yen). Mexican suppliers (500,000 pesos) (60,000) (9,000) (28,120) Total payables (97,120) Other current assets (liabilities) Investment in forward purchase contract (for delivery of 500,000 pesos in 30 days at $0.0556) . .. Investment in forward sale contract (for delivery of 300,000 euros in 60 days at $1.1785) . (525) 480 Total other current assets (liabilities)... (45) Relevant exchange rates (S/FC) for the above currencies at December 31, 2020, are: Currency Euro (spot rate).... Euro (60-day forward rate) Rupee (spot rate). Riyal (spot rate). Yen (spot rate) Mexican peso (spot rate) $1.17340 1.16840 0.01639 0.26660 0.00925 0.05500 Mexican peso (30-day forward rate) 0.05365 Required Prepare a schedule to compute the exchange gain or loss recognized by International Distributors in 2020. Record the needcd adjusting entries b. The forward purchase is a hedge of the payable to Mexican suppliers, and the forward sale is a hedge of the receivable from Belgian customers. Based on the data in this problem, what percentage of the change in value of the receivable (payable) is hedged by the respective forward contract? Why don't the forward contracts perfectly hedge the changes in value of the related receivable payable? a. Computation of Exchange Gain or Loss, Exposed Positions and Forward Contracts In ternational Distributors, Inc., a U.S. company, is active in the import/export business. An analysis of International's receivables, payables, and other assets (liabilities) prior to adjustment at December 31 2020, disclosed the following P8.4 Receivables U.S. customers.... 100,000 Belgian customers (300,000 euros) Indian customers (1,200,000 rupees) Saudi Arabian customers (90,000 riyal) 355,000 19,500 23,000 497,500 Total receivables.. Payables U.S. suppliers.. Japanese suppliers (1,000,000 yen). Mexican suppliers (500,000 pesos) (60,000) (9,000) (28,120) Total payables (97,120) Other current assets (liabilities) Investment in forward purchase contract (for delivery of 500,000 pesos in 30 days at $0.0556) . .. Investment in forward sale contract (for delivery of 300,000 euros in 60 days at $1.1785) . (525) 480 Total other current assets (liabilities)... (45) Relevant exchange rates (S/FC) for the above currencies at December 31, 2020, are: Currency Euro (spot rate).... Euro (60-day forward rate) Rupee (spot rate). Riyal (spot rate). Yen (spot rate) Mexican peso (spot rate) $1.17340 1.16840 0.01639 0.26660 0.00925 0.05500 Mexican peso (30-day forward rate) 0.05365 Required Prepare a schedule to compute the exchange gain or loss recognized by International Distributors in 2020. Record the needcd adjusting entries b. The forward purchase is a hedge of the payable to Mexican suppliers, and the forward sale is a hedge of the receivable from Belgian customers. Based on the data in this problem, what percentage of the change in value of the receivable (payable) is hedged by the respective forward contract? Why don't the forward contracts perfectly hedge the changes in value of the related receivable payable? a
