This problem is a kind of final exam...

so, i hope somebody done it fast.

thanks

Problem 1 Part A On March 31st 2016 Valasindo, Inc purchased 100 currency put option contract at $2/contract. Each option contract can be used to trade 1,000 at $1.5/. The contract will expired on June 30 th 2016. Valasindo, Inc prepares monthly financial report. Date 31 Mar 30 Apr 31 May 30 Jun Spot Rate ($/) 1.40 1.35 1.70 1.45 Put Option Premium ($) 2.0 1.5 1.0 0.5 Please prepare the necessary entries for each accounting date, given the following unrelated assumptions: 1. On May 31st 2016, Valasindo decided to sell its options and its 100,000 to another party. 2. On June 30th 2016, Valasindo decided to exercise its options. Part B On Jan 1st 2016, Capital, Co issued 100 convertible bonds at 101, each having nominal value of $1,000. Each bond can be converted into 100 common shares @$10 par value. The bond pays 6% coupon interest annually and will due on Dec 31st 2020. At time of issuance, market rate is 7%. Instructions: 1. Calculate the fair value of similar bond with no convertible features 2. Prepare the necessary entries on issuance date and on maturity date, assuming that Capital, Co exercises 30% of its right on Dec 31st 2020. Problem 2 a. What is the rationale of hedge accounting? please explain. You can use an example or illustration to explain your answer more clearly. (5%) b. Wonderwoman Corporation had a bank loan of $75.000.000, which was to be repaid at the end of 20X5. The loan carried an interest rate based on the three-month London Interbank Offer Rate (LIBOR) plus 100 basis points. Interest on the loans was payable half-yearly on 30 June and 31 December. Wonderwoman Corporation concerned that interest rate might increase during the next three years, decided to enter into a swap with a financial intermediary on 1 January 20X3, which invloved Wonderwoman Corporation paying a fixed rate 6,00% per annum and receiving LIBOR plus 100 basis points. The notional amount of the swap was $75.000.000. Page 1 of 5 LIBOR was reset semi-annualy with 1 January 2013 in order to determine the next interest payment. Differences between the fixed rate and the variable rate would be settled on a semi-annual basis. The following interest rates occures over the term of the swap. The following assumptions are made: (a) the yield curve is flat, (b) no hedge ineffectiveness, and (c) other risk remain constant. Wonderwoman Corporation designates the swap as a cash flow hedge. Required: a. Complete the calculation of the fair value of the swap below. (10%) b. Prepare the journal entries required to account for the loan and the swap over the period of the swap. (15%) Problem 3 (20%) Part A: Segment Reporting (15%) Indo Global Corporation has identified 8 operating segments. Indonesia and China furniture manufacturing segments are not aggregated because they have dissimilar economic characteristic. The domestic and the commercial manufacturing segments in Indonesia and China are aggregated because they have similar economic characteristics. IT Consulting for Indonesia and other Asian countries are potential growth segments, which are expected to contribute materially to group Page 2 of 5 revenue in the future. Below is the information related 8 operating segments and consolidated revenue per financial statements (in million). Segment Indonesia furniture manufacturing - Domestic - Commercial Office Total Revenue 9.000 6,100 15.100 Profit / Loss 2.020 1.370 3.390 Total Assets 7.000 4.730 11.730 China furniture manufacturing - Domestic - Commercial Office 3.000 820 3.300 2.100 580 2.200 5.100 1.400 5.500 Furniture retail 11.600 1.900 11.600 IT consulting (Indonesia) 13.300 4.000 9.640 IT consulting (other Asian countries) 4.100 700 3.500 Electronic equipment 3.850 900 2.590 Land development 5.500 1.000 4.500 Machinery hire 1.100 897 1.718 Total of all segments 59.650 14.187 50.778 Consolidated reported revenue 53.900* * The difference between the segments revenue and the consolidated reported revenue is due to internal sales between the furniture businesses. Required: You are asked to assist Indo Global Corporation to identify its reportable segments by applying the required tests. Part B: Interim Reporting (5%) In preparing the interim reports you are facing the below situations. What you should do for each situation? Please explain in brief. 1 2 3 4 5 There was a change in accounting policy. There was change accounting estimate. Physical inventory count was not conducted There was an expenditure affecting more than one interim period. The market prices for inventory items decline. Problem 4 (20%) Part A (7,5%): Analyse and give your comment on the following arrangement: (Hint: do the arrangements contain joint control? Support your argument by explaining the condition of such arrangement) PT. Merak (M), PT. Perkutut (P), PT. Rajawali (R), and PT. Service (S) enter into agreement No. 1 to undertake passenger air service. PT. Airlines (A1) is formed to direct all activities related to the activity including review Page 3 of 5 and approval of annual budgets and operating policies. PT. A1 is led by four members nominated by M, P, R, and S. The decisions of the PT. A1 require the unanimous vote of the members. M and P enter into agreement No. 2, which establishes Operation Unit Baggage (B2) to coordinate cooperation between M and P, with the respect to providing smooth transfer of passenger air service activities. M and P each appoint one representative to lead B2. B2 has the power to make decisions to be submitted for approval to PT. A1. Any matter to be decided by B2 requires the consent of both parties. However, if agreement cannot be reached between M and P, P has the deciding vote. The decisions made in B2 are binding on M and P and they must vote accordingly in PT. A1. Part B (7,5%): PT. DDS and PT. CNP have agreed to jointly establish a corporation (C) over which they have joint control. Neither legal form nor contractual terms indicate that PT. DDS and PT. CNP have rights to the assets, or obligations for the liabilities. However, PT. DDS and PT. CNP agree the following: 1. PT. DDS and PT. CNP will equally purchase 70% of the output produced by C (each company purchases 35% each). Both companies will sell their share of the output to third parties. The remaining capacity (30%) has to be sold to third parties. 2. The price of the output sold to PT. DDS and PT. CNP is determined at a level of market price. 3. In the case that C cannot sale the remaining capacity, PT. DDS and PT. CNP will buy the output at cost. What is the type of the above joint arrangement? How is its accounting treatment? Part C (7,5%): The following information is taken from financial statement PT. Adhi Karya (Persero) Tbk in 2015. Page 4 of 5 According to the above information, provide the entries during 2015 related to investment in joint venture of PT Adhi Karya in: 1. Adhi Persada Properti - Eden Capital (2,5%) 2. Adhi - Wika - Hutama (Jalan Tol Nusa Dua - Benoa) (2,5%) Page 5 of 5