Question 3. (16 marks) On September 1, Year 4, Rogest Company contracted to sell equipment to a firm in France at a selling price of FCU 500,000. The contract called for the equipment to be delivered on November 1, Year 4, with payment to be received on December 15, Year 4. On September 1, Year 4, Rogest arranged a forward contract to deliver FCU 500,000 on December 15, Year 4, at a rate of FCU1 = $1.30. Rogest's year-end is September 30th. Exchange rates for Year 4 were as follows: Spot Rates Forward Rates September 1 FCU1 = $1.33 FCU1 = $1.30 September 30 FCU1 = $1.30 FCU1 = $1.31 November 1 FCU1 = $1.32 FCU1 = $1.34 December 15 FCU1 = $1.35 Required: Show ALL supporting calculations for full marks a) Prepare the memorandum and journal entries that Rogest should make to record the events described assuming that the forward contract is designated as a cash flow hedge and assume Rogest applies hedge accounting. (9 marks) b) Prepare partial Statements for the Year ending September 30, Year 4 and at September 30 Year 4 to indicate how each account would appear on the company's financial statements. (3 marks) c) Calculate the discount or premium (state which one) and explain (along with allocation of dollar values) how the net gain or loss (state which one) is recognized. (3 marks) d) If Rogest did NOT enter into a hedge, what is the total gain or loss Rogest would have incurred on this transaction? (No journal entries required) (1 mark) Question 3. (16 marks) On September 1, Year 4, Rogest Company contracted to sell equipment to a firm in France at a selling price of FCU 500,000. The contract called for the equipment to be delivered on November 1, Year 4, with payment to be received on December 15, Year 4. On September 1, Year 4, Rogest arranged a forward contract to deliver FCU 500,000 on December 15, Year 4, at a rate of FCU1 = $1.30. Rogest's year-end is September 30th. Exchange rates for Year 4 were as follows: Spot Rates Forward Rates September 1 FCU1 = $1.33 FCU1 = $1.30 September 30 FCU1 = $1.30 FCU1 = $1.31 November 1 FCU1 = $1.32 FCU1 = $1.34 December 15 FCU1 = $1.35 Required: Show ALL supporting calculations for full marks a) Prepare the memorandum and journal entries that Rogest should make to record the events described assuming that the forward contract is designated as a cash flow hedge and assume Rogest applies hedge accounting. (9 marks) b) Prepare partial Statements for the Year ending September 30, Year 4 and at September 30 Year 4 to indicate how each account would appear on the company's financial statements. (3 marks) c) Calculate the discount or premium (state which one) and explain (along with allocation of dollar values) how the net gain or loss (state which one) is recognized. (3 marks) d) If Rogest did NOT enter into a hedge, what is the total gain or loss Rogest would have incurred on this transaction? (No journal entries required) (1 mark)
