Complete this question by entering your answers in the tabs below.Req B1Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, preparejournal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entry isrequired for a transaction/event, select "No journal entry required" in the first account field.)No12345678910Req A11112Date06/0106/0106/3006/3006/3006/3009/0109/0109/0109/0109/01Req A209/01Accounts receivable (P)SalesForeign currency optionCashForeign exchange gain or lossAccounts receivable (P)Req 82Foreign exchange gain or lossForeign currency optionNo journal entry requiredNo journal entry requiredForeign exchange gain or lossAccounts receivable (P)General JournalForeign exchange gain or lossForeign currency optionNo journal entry requiredNo journal entry requiredForeign currency (P)Accounts receivable (P)CashForeign currency (P)Foreign currency option< Req A2Req B2 >33>>>33333>33333DebitCredit On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,110,000 pesos and will receivepayment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,110,000 pesos in three months at a strikeprice of $0.076. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value isrecognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows:DateJune 1June 30September 1Maxwell must close its books and prepare its second-quarter financial statements on June 30.a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, preparejournal entries for the export sale and related hedge in U.S. dollars.a-2. What is the impact on net income over the two accounting periods?b-1. Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, preparejournal entries for the export sale and related hedge in U.S. dollars.b-2. What is the impact on net income over the two accounting periods?Complete this question by entering your answers in the tabs below.No12345Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, preparejournal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entry isrequired for a transaction/event, select "No journal entry required" in the first account field.)678910Red A11112Date06/0106/0106/3006/3006/3006/3009/0109/01Spot Rate$ 0.0760.0750.07409/0109/0109/01Put Option Premiumfor September 1(strike price $0.076)$ 0.00390.0029N/AReq A209/01Req B1Accounts receivable (P)SalesForeign currency optionCash> Answer is not complete.Req B2Foreign exchange gain or lossAccounts receivable (P)Other comprehensive incomeForeign currency optionGeneral JournalOther comprehensive incomeForeign exchange gain or lossForeign exchange gain or lossOther comprehensive incomeForeign exchange gain or lossAccounts receivable (P)Other comprehensive incomeForeign currency optionForeign currency (P)Accounts receivable (P)Other comprehensive incomeForeign exchange gain or lossCashForeign currency (P)Foreign currency optionForeign exchange gain or lossOther comprehensive income<Req A1Req A2 >✔✔✔✔✔♥✔✔00 00 00✔✔✔✔✔✔✔✔✔✔DebitCredit

A cash flow hedge refers to the form of a hedge that is curated in order to safeguard the company's…

Answered: Req B1 ignates the foreign currency…

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,100,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,100,000 pesos in three months at a strike price of $0.074. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Date Spot Rate Put Option Premium for September 1 (strike price $0.074) June 1 $ 0.074 $ 0.0037 June 30 0.073 0.0028 September 1 0.072 N/A Maxwell must close its books and prepare its second-quarter financial statements on June 30. Required: a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2. What is the…
On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,170,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,170,000 pesos in three months at a strike price of $0.082. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Put Option Premium Spot Date for September 1 Rate (strike price $0.082) June 1 S 0.082 June 30 0.081 September 1 0.080 $ 0.0045 0.0032 N/A Maxwell must close its books and prepare its second-quarter financial statements on June 30. a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2. What is the impact on net income over…
On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,140,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,140,000 pesos in three months at a strike price of $0.080. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Date Spot Rate Put Option Premiumfor September 1(strike price $0.080) June 1 $ 0.080 $ 0.0043 June 30 0.079 0.0031 September 1 0.078 N/A Maxwell must close its books and prepare its second-quarter financial statements on June 30. a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2.…
On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,070,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,070,000 pesos in three months at a strike price of $0.070. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Put Option Premium for Date June 1 June 30 September 1 Spot Rate $ 0.070 0.069 0.068 September 1 (strike) price $0.070) $ 0.0033 0.0026 N/A Maxwell must close its books and prepare its second-quarter financial statements on June 30. Required: a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2. What is the impact on net…
On June 1, Wellmax Co. (a U.S.-based company) sold goods to a foreign customer for 1,040,000 pesos. The customer will pay on September 1. On June 1, Wellmax bought an option (strike price = $0.066) to sell 1,040,000 pesos on September 1. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. The foreign currency option is designated a fair value hedge. Relevant exchange rates and option premia follow. Date June 1 June 30 September 1 What is the fair value of the option contract on June 1? Spot Rate $0.066 0.065 0.064 Put Option Premium for September 1 (strike price $0.066) $0.0029 0.0024 N/A
H On June 1, Wellmax Co. (a U.S.-based company) sold goods to a foreign customer for 1,040,000 pesos. The customer will pay on September 1. On June 1, Wellmax bought an option (strike price = $0.066) to sell 1,040,000 pesos on September 1. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. The foreign currency option is designated a fair value hedge. Relevant exchange rates and option premia follow. Spot Rate June 1 $0.066 June 30 0.065 September 1 0.064 What is the net foreign exchange gain or loss Wellmax will recognize on its June 30 income statement? Use a-sign to indicate loss. Date Put Option Premium for September 1 (strike price $0.066) $0.0029 0.0024 N/A
On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.09 per Norwegian krone, Derby enters into a forward contract to purchase 6 02,500 Norwegian kroner at a three-month forward rate of $0.10. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.098 per Norwegian krone, Derby orders and receives the merchandise, paying 602,500 kroner. The merchandise is sold within 30 days. Required: a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge. a-2. What amount should Derby Corporation report in the current year's net income as cost of goods sold? b. What amount should Derby Corporation report in the current year's net income as foreign exchange gain or loss?
On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.28 per Norwegian krone, Derby enters into a forward contract to purchase 617,500 Norwegian kroner at a three-month forward rate of $0.29. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.286 per Norwegian krone, Derby orders and receives the merchandise, paying 617,500 kroner. The merchandise is sold within 30 days. Required: a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge. a-2. What amount should Derby Corporation report in the current year's net income as cost of goods sold? b. What amount should Derby Corporation report in the current year's net income as foreign exchange gain or loss? Complete this question by entering your…
On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.45 per Norwegian krone, Derby enters into a forward contract to purchase 527,500 Norwegian kroner at a three-month forward rate of $0.490. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.482 per Norwegian krone, Derby orders and receives the merchandise, paying 527,500 kroner. The merchandise is sold within 30 days. What amount(s) does Derby report in net income as a result of this cash flow hedge of a forecasted transaction and the related purchase and sale of merchandise? Cost of goods sold of $254,255 plus foreign exchange loss of $4,220 Cost of goods sold of $258,475 Cost of goods sold of $237,375 plus foreign exchange loss of $21,100 Cost of goods…
On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.33 per Norwegian krone, Derby enters into a forward contract to purchase 635,000 Norwegian kroner at a three-month forward rate of $0.360. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.351 per Norwegian krone, Derby orders and receives the merchandise, paying 635,000 kroner. The merchandise is sold within 30 days. What amount(s) does Derby report in net income as a result of this cash flow hedge of a forecasted transaction and the related purchase and sale of merchandise? Multiple Choice Cost of goods sold of $222,885 plus foreign exchange loss of $5,715 Cost of goods sold of $228,600 less foreign exchange gain of $19,050 Cost of goods sold of $209,550…
ABC Co. entered a forward contract to hedge a ¥100,000,000 which the company expects to pay in 90 days. The contract calls for ABC Co. to deliver yen (¥) at ¥111.25 per U.S. dollar. If on the delivery date, the spot rate is ¥109.75 per U.S. dollar. How much is the gain (loss) on the hedge?
Jordan Corp is a US manu8facturer of auto pats with branchoperatiopns in France. on December 31, 2018 wishesto use a foreign currency option to hedge a 10,000,000 euro denominated accounts receivable that is due in two years. Jordan plans to use fair value hedge accounting. Over the subsequent 4 quarters the following are the changes in fair value of the receivable and the forreign currency option hedge. 1) Quarter ended March 31, 2019: Euro receivable increases by $400,000 Option hedge declines by $350,000 2) Quater ended June 30, 2019: Euro receivable decreases by $500,000 Option hedge increases by $400,000 3) Quarter ended Sept 30, 2019: Euro receivable decreases by $800,000 Option hedge increases by $700,000 4) Quarter ended Dec. 31, 2019: Euro receivable increases by $200,000 Option hedge declines by $100,000 Identify by codification reference, e.g. xxx-xx-xx-xx, and attach and highlight the appropriate section(s) of FASB codification that describe the alternate criteria that can…

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Req B1 ignates the foreign currency option as a fair value rt sale and related hedge in U.S. dollars. (Do not vent, select "No journal entry required" in the firs counts receivable (P) es eign currency option Req B2 General Journal