The forward contract is to be settled net University of Belize Advance

The forward contract is to be settled net university

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The forward contract is to be settled net.
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University of Belize Advance Accounting Test –APR 2014 On December 31, 2011, Astrotuff's year end, the forward rate to January 30, 2012 is $1.78 per pound. The spot and forward rates on January 30, 2012 are $1.85 per pound. Astrotuff purchases 200,000 pounds of nylon on January 30 when the forward contract expires. Required : Prepare the necessary journal entries to account for this cash flow hedge and related purchase of nylon. 11/1/11 No entry 12/31/11 Other Comprehensive Income 4,000 Forward Contract 4,000 (200,000 × ($1.80 - $1.78)) Exchange loss 6,667 Other Comprehensive Income 6,667 Discount = 1.75-1.80= 0.05 x 200,000=10,000 60/90 x 10,000= 6667 1/30/12 Forward Contract 14,000 Other Comprehensive Income 14,000 (($1.80 - $1.85) × 200,000) = $10,000 asset Exchange loss 3,333 Other Comprehensive Income 3,333 (30/90 x 10,000 = 3333 Cash 10,000 Forward Contract 10,000 Nylon inventory 370,000 Cash 370,000 (200,000 × $1.85) 4) On November 1, 2010, Mayberry Corporation, a U.S. corporation, purchased from Cantata Corporation, a Mexican company, some machinery that cost 1,000,000 pesos. The invoice was payable in pesos on January 30, 2011. To hedge against rapid changes in the peso, Mayberry entered into a forward contract on November 1, 2010 with AB Trader & Company, a US brokerage and investment firm. The contract specified that Mayberry would buy 1,000,000 pesos from AB Trader at $0.084 per peso for settlement on January 30, 2011. Assume that all three companies are subject to the same accounting standards and have December 31st year-ends. The spot rates for pesos on
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University of Belize Advance Accounting Test –APR 2014 November 1, December 31, and January 30, are $0.082, $0.080, and $0.089, respectively. The 30-day forward rate for pesos on December 31, 2010 is $0.083. The forward contract is not settled net. Required : Record General Journal entries for Mayberry Corporation on November 1, December 31, and January 30. If no entry is required on a particular date, indicate "No entry" in the General Journal. This is a fair value hedge. Mayberry's General Journal Date Account Name Debit Credit 11/01/10 Machinery 82,000 Accounts Payable (pesos) 82,000 11/01/10 Contract Receivable (pesos) 84,000 Contract Payable 84,000 12/31/10 Accounts Payable (pesos) 2,000 Exchange Gain 2,000 ((.082 - .080) × 1,000,000) 12/31/10 Exchange Loss 1,000 Contract Receivable (pesos) 1,000 [($.083 - $.084) × 1,000,000] 01/30/11 Exchange Loss 9,000 Accounts Payable (pesos) 9,000 [(.089 - .080) × 1,000,000] Contract Receivable (pesos) 6,000 Exchange Gain 6,000 [(.089 - .083 ) × 1,000,000] Cash (pesos) 89,000 Contract payable 84,000 Contract Receivable (pesos) 89,000 Cash 84,000 Accounts Payable (pesos) 89,000 Cash (pesos) 89,000
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University of Belize Advance Accounting Test –APR 2014 5) Tank Corporation, a U.S. manufacturer, has a June 30 fiscal year end. Tank
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