On November 1st 2017 The USA Company sold merchandise to the Paris Company for 1,000,000 Euros when the Euro was worth $1 | |||||||||||
The Paris Company will pay for the merchandise on May 1, 2018 | |||||||||||
On November 1st The USA Company took out a forward contract to sell 1,000,000 Euros on May 1 2018 for $1.09 each | |||||||||||
The USA Company borrows at 12% and the present value of a dollar at 12% is .94340 | |||||||||||
On December 31, the Euro was worth $1.04 | |||||||||||
On May 1 the Euro was worth $1.15 | |||||||||||
ON May 1 Paris Company paid USA Company and USA Company turned over the Euros to its bank to satisfy its forward contract | |||||||||||
Required: | Make the necessary journal entries of the USA Company beginning with the sale of the merchandise and ending with | ||||||||||
the transfer of the Euros to their bank in exchange for the dollars to satsify the forward contract. | |||||||||||
On November 1st 2017 The USA Company sold merchandise to the Paris Company for 1,000,000 Euros when the Euro was worth $1 The Paris Company will pay for the merchandise on May 1, 2018 On...
On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 270,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 270,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply: Date November 1, 2017 December 31, 2017 April 30, 2018 Spot Rate $ 0.38 0.36...
On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 190,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 190,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply: Date Spot Rate Forward Rate (to April 30, 2018) November 1, 2017 $ 0.30 $...
Problem 4. On November 1, 2017, US Frigatebird Company sold an airplane worth S1 million Australian dollars to Australian company Heron Inc., to be paid on February 1, 2018 in Sydney. In order to hedge foreign exchange, Frigatebird entered into a 90 day forward contract on the same day for the amount of the sale at .73 US per Australian dollar. The relevant exchange rates are of US dollars per Australian dollar: Forward Rate Date Spot Rate (Delivery on 2/1/2018)...
Larkin Hydraulics. On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression turbine to Rebecke-Terwilleger Company of the Netherlands for €4,400,000, payable as £2,200,000 on August 1 and €2,200,000 on November 1. Larkin derived its price quote of €4,400,000 on April 1 by dividing its normal U.S. dollar sales price of $6,160,000 by the then current spot rate of $1.4000/€. By the time the order was received and booked on May 1, the euro...
Larkin Hydraulics. On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression turbine to Rebecke-Terwilleger Company of the Netherlands for €4,000,000, payable as €2,000,000 on August 1 and €2,000,000 on November 1. Larkin derived its price quote of €4,000,000 on April 1 by dividing its normal U.S. dollar sales price of $4.320,000 by the then current spot rate of $1.0800/€. By the time the order was received and booked on May 1, the euro...
Below is set of transactions for company, Orange Electronics Warehouse (“OEW”), from January 1, 2018 through December 31, 2018. Prepare the journal entries for each transaction shown, Also, please prepare any adjusting entries which may be required such as depreciation, amortization of prepaid expenses, etc., they can be done once at the end of the year The following transactions took place during the year ended December 31, 2018: (1) January 2 New investors contributed $225,000 cash to help in launching...
Volkswagen's Hedging Strategy
1. Why did Volkswagen suffer a 95% drop in its 4th
quarter, 2003 profits?
2. Do you think the Volkswagen’s decision to hedge only 30% of
its anticipated U.S. sales was a good? Why or why not?
3. Do you think the Volkswagen’s decision to revert back to
hedging 70% of its foreign currency exposure was a good decision?
Why or why not?
Embraer and the Wild Ride of the Brazilian
Real
4. Is a decline in...