show how did you get every number . Question 2 - example of a cash flow hedge
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show how did you get every number
. Question 2 - example of a cash flow hedge Company B management had a meeting on 1 October 2012 to discuss the capital expenditure budget for the year 2013. During the meeting, the management decided to purchase equipment for USD1 million on 1 February 2013. Functional currency is SGD. The equipment was delivered on 1 February 2013. In order to hedge the foreign exchange risk, company B entered into a foreign exchange forward contract on 1 October 2012 to buy USD1 million sell SGD with maturity date 1 February 2013. The USD/SGD spot rates and forward rates are as follows: 1-Oct-12 31-Dec-12 1-Feb-13 USD/SGD spot rates 1.23 1.22 1.23 USD/SGD forward points for maturity 1 February 2013 -0.0003 -0.0001 0 Requirements (a) Explain if a hedge exists; if so the type of hedge, hedging instrument and hedged item; if not why. (b) Record the journal entries on 31 December 2012 and 1 February 2013
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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