Question $25$

Questions $21-27$ use the same facts, listed below and repeated for each question:

On Nov. $1,20$x$1,$ TasteeFood Co$.,$ a U$.$S$.$ company, purchased and received $15$ tons of assorted dried peppers from Ola Co$.$ which is

located in Mexico. The peppers cost a total of $100$ million pesos but TasteeFood does not plan to pay the related payable until Feb.

$1,202.$

TasteeFood is concerned that pesos may increase in value so decided on Nov. $1,20$x$1$ to hedge using a forward contract, with a

forward price of $$0\mathrm{.}047/$peso$.$ Some rates are:

answer this question: What is the total effect of any entries needed on $\frac{2}{1}\frac{?}{20}2$ on Investment in Forward?

$$400,000$ credit

$($B$)$ $$900,000$ credit

$$500,000$ debit

$$4,700,000$ debit

None of the above

Question $26$

Questions $21-27$ use the same facts, listed below and repeated for each question:

On Nov. $1,20$x$1,$ TasteeFood Co$.,$ a U$.$S$.$ company, purchased and received $15$ tons of assorted dried peppers from Ola Co$.$ which is

located in Mexico. The peppers cost a total of $100$ million pesos but TasteeFood does not plan to pay the related payable until Feb.

$1,202.$

TasteeFood is concerned that pesos may increase in value so decided on Nov. $1,20$x$1$ to hedge using a forward contract, with a

forward price of $$0\mathrm{.}047/$peso$.$ Some rates are:

Q$26$: Make any journal entries needed on $\frac{2}{1}\frac{?}{20}2$ for anything related to the purchase and forward. Use that entry or entries to

answer this question: What is the total effect of any entries needed on $2/1/20$x$2$ on Net Income?

$$400,000$ increase

$$500,000$ increase

$$4,700,000$ increase

$$5,600,000$ increase

None of the above$=$