Scribd
Upload
138 views4 pages

04 Homework (Ramirez)

1. ABC Co. entered a forward contract to buy 40,000 Korean won for ₱49,600 from a bank at a forward rate of ₱1.24 to hedge against fluctuations in the Korean won. 2. On December 31, 20x1, ABC Co. would recognize a derivative liability of ₱2,400 in its statement of financial position based on the change in spot rates. 3. There are no adjustments to the inventory account on December 31, 20x1 as a result of the forward contract.

Uploaded by

Imthe One
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
138 views4 pages

04 Homework (Ramirez)

1. ABC Co. entered a forward contract to buy 40,000 Korean won for ₱49,600 from a bank at a forward rate of ₱1.24 to hedge against fluctuations in the Korean won. 2. On December 31, 20x1, ABC Co. would recognize a derivative liability of ₱2,400 in its statement of financial position based on the change in spot rates. 3. There are no adjustments to the inventory account on December 31, 20x1 as a result of the forward contract.

Uploaded by

Imthe One
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Hedged

CMU item –
Hedging Instrument –
Forward Contract (Derivative)
Enrichment Learning Activity

Name:
Hedging Eugene EJ C. Ramirez Date: April 29, 2022

instrument –
Year and Section: 3rd - BSMA
Module #: 4
Instructor: Prof. Jefferson Cruz
Topic: ACCTG. FOR DERIVATIVES &
HEDGING TRANSACTIONS - PART 2

Account Directions:

payable Use the following information


for the next seven questions:

Hedged item – On December 15, 20x1, ABC Co.


purchased goods from a Korean
firm for 40,000 wons. ABC Co.

Hedging was concerned about the


fluctuation in the Korean won,

instrument – so on this date, ABC Co. entered


a 30-day forward contract to buy
40,000 wons for ₱49,600 from a

Account
bank at the forward rate of
₱1.24.

payable Relevant rates are shown below:

Hedged item –
 

Spot rate
Dec. 15, 20x1

1.20
Dec. 31, 20x1

1.26
Jan. 15, 20x2

1.30

Hedging
Forward rate 1.24 1.27 1.30

instrument – 1. The purchased inventory


shall be recognized at

Account
payable
Hedged item –
Cash (in Won)

Hedging
40,000
Multiply: Spot Rate
1.20

instrument – Inventory
48,000

Account
SY2021-2022 1st Term Homework
payable
Hedged
1.CMU
Hedged
item –
Hedging Instrument –
Forward Contract (Derivative)
Enrichment Learning Activity
item –
Hedging
2.
instrument –
3. Hedging 2. The derivative asset
(liability) to be included in

Account –
the December 31, 20x1
instrument statement of financial
position is

payable
4.
Hedged item –
5. Account
payable
Hedging
6. Hedged–
instrument
Cash (in Won)
40,000
Multiply: Spot Rate (1.26 – 1.20)
item – 0.06

Account
7.
Derivative Liability (2,400)

8.payable
Hedging
Hedged item ––
instrument
3. The adjustment to the
inventory account on
December 31, 20x1 is –

9.
Hedging increase (decrease)

- There are no adjustments


10. Account
instrument – happen in inventory account
on December 31, 20x1.

payable
Account
11.payable
Hedged
Hedgeditemitem
– – 4. How much is the FOREX gain
(loss) on foreign currency
12. transaction on January 15,
20x2?

13.Hedging
Hedging
instrument
instrument––
14.
Account
15. payable
Account
SY2021-2022 1st Term Homework
CMU
Enrichment Learning Activity

Cash (Won) 40,000


Multiply: Spot Rate 1.26 50,400

Cash (Won) 40,000


Multiply: Spot Rate 1.30 52,000
FOREX Loss (1,600)

5. How much is the gain (loss) on change in fair value of the derivative on January 15, 20x2?

Fair Value, January 15, 20x2 2,400


Less: Fair Value, December 31,20x1 1,200
Gain on Forward Contract 1,200

6. The total net effect of the two contracts on profit or loss in 20x2 is – gain (loss)

Forex Loss 1,600


LESS: Gain 1,200
Total Net Effect (400)

7. Assuming the forward contract is settled on a net cash basis, how much is the net cash settlement receipt (payment) on
January 15, 20x2?

Cash (Foreign Currency) 52,000


Less: Cash (Local Currency) 49,600

SY2021-2022 1st Term Homework


CMU
Enrichment Learning Activity

Net Cash Settlement Receipt - January 15, 20x2 2,400

SY2021-2022 1st Term Homework

You might also like