Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Kiwi Painting Company engages in a number of foreign currency transactions in euros ( ) . For each of the following independent transactions, determine the
Kiwi Painting Company engages in a number of foreign currency transactions in euros For each of the following independent
transactions, determine the dollar amount to be reported in the December financial statements for the items presented in the
following requirements. The relevant direct exchange rates for the euro follow:
These are the independent transactions:
Kiwi entered into a forward exchange contract on September to be settled on February to hedge a firm foreign
currency commitment to purchase inventory on November with payment due on February The forward contract
was for the agreedupon cost of the inventory. The derivative is designated as a fair value hedge of the firm's commitment.
Kiwi entered into a forward exchange contract on September X to be settled on February X to hedge a forecasted
purchase of inventory on November X The inventory was purchased on November with payment due on February
The forward contract was for the expected cost of the inventory. The derivative is designated as a cash flow hedge
to be continued through to payment of the eurodenominated account payable.
Kiwi entered into a forward contract on November to be settled on February to manage the financial currency
exposure of a eurodenominated accounts payable in the amount of from the purchase of inventory on that date. The
payable is due on February X The forward contract is not designated as a hedge.
Kiwi entered into a forward contract on September to speculate on the possible changes in exchange rates between the
euro and the US dollar between September X and February X The forward contract is for speculation purposes and is
not a hedge.
Required:
Enter the dollar amount that would be shown for each of the following items as of December X Compute the statement
amounts net. For example, if the transaction generated both a foreign currency exchange gain and a loss, specify just the net amount
that would be reported in the financial statements.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started