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In: Accounting
On December 1, 2017, Ringling Company (a U.S.-based company) entered into a three-month forward contract to...
On December 1, 2017, Ringling Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,010,000 pesos on March 1, 2018. The following U.S. dollar per peso exchange rates apply:
| Date | Spot Rate | Forward Rate (to March 1, 2018) |
||||
| December 1, 2017 | $ | 0.009 | $ | 0.012 | ||
| December 31, 2017 | 0.011 | 0.014 | ||||
| March 1, 2018 | 0.015 | N/A | ||||
Ringling's incremental borrowing rate is 9 percent. The present value factor for two months at an annual interest rate of 9 percent (1 percent per month) is 0.9852.
Which of the following correctly describes the manner in which Ringling Company will report the forward contract on its December 31, 2017, balance sheet?
Multiple Choice
a. As an asset in the amount of $1,990.
b. As a liability in the amount of $995.
c. As an asset in the amount of $2,985.
d. As a liability in the amount of $2,985.
Solutions
Expert Solution
ANSWER
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ekkarill92 answered 1 year agoRelated Solutions
On November 1, 2015, Fortune Company (a U.S.-based company) entered into a five-month forward contract to...
On November 1, 2015, Fortune Company (a U.S.-based company)
entered into a five-month forward contract to buy 800,000 Mexican
pesos on March 31, 2016. The following U.S. dollar per
peso exchange rates apply:
Forward
Rate
Date Spot
Rate (to
03-01-2016)
November 1, 2015
………………… $0.052 $0.047
December 31, 2015
………………. 0.045 0.057
March 31, 2016
……………………… 0.048
The present value factor corresponding to the company’s
incremental borrowing rate for time period involved is 0.9706
Question #11: Forward contract
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Required: How and in...
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to...
On October 1, 2017, Sharp Company (based in Denver, Colorado)
entered into a forward contract to sell 230,000 rubles in four
months (on January 31, 2018) and receive $119,600 in U.S. dollars.
Exchange rates for the ruble follow:
Date
Spot Rate
Forward Rate
(to January 31, 2018)
October 1, 2017
$
0.48
$
0.52
December 31, 2017
0.51
0.54
January 31, 2018
0.53
N/A
Sharp's incremental borrowing rate is 12 percent. The present
value factor for one month at an...
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to...
On October 1, 2017, Sharp Company (based in Denver, Colorado)
entered into a forward contract to sell 130,000 rubles in four
months (on January 31, 2018) and receive $54,600 in U.S. dollars.
Exchange rates for the ruble follow:
Date
Spot Rate
Forward Rate
(to January 31, 2018)
October 1, 2017
$
0.38
$
0.42
December 31, 2017
0.41
0.44
January 31, 2018
0.43
N/A
harp's incremental borrowing rate is 12 percent. The present
value factor for one month at an...
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to...
On October 1, 2017, Sharp Company (based in Denver, Colorado)
entered into a forward contract to sell 310,000 rubles in four
months (on January 31, 2018) and receive $186,000 in U.S. dollars.
Exchange rates for the ruble follow:
Date
Spot Rate
Foward Rate (to January 31, 2018)
10/1/2017
0.56
0.6
12/31/17
0.59
0.62
01/31/2018
0.61
N/A
Sharp's incremental borrowing rate is 12 percent. The present
value factor for one month at an annual interest rate of 12 percent
(1 percent...
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to...
On October 1, 2017, Sharp Company (based in Denver, Colorado)
entered into a forward contract to sell 310,000 rubles in four
months (on January 31, 2018) and receive $186,000 in U.S. dollars.
Exchange rates for the ruble follow: Date Spot Rate Forward Rate
(to January 31, 2018) October 1, 2017 $ 0.56 $ 0.60 December 31,
2017 0.59 0.62 January 31, 2018 0.61 N/A Sharp's incremental
borrowing rate is 12 percent. The present value factor for one
month at an...
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to...
On October 1, 2017, Sharp Company (based in Denver, Colorado)
entered into a forward contract to sell 340,000 rubles in four
months (on January 31, 2018) and receive $122,400 in U.S. dollars.
Exchange rates for the ruble follow:
Date
Spot Rate
Forward Rate
(to January 31, 2018)
October 1, 2017
$
0.32
$
0.36
December 31, 2017
0.35
0.38
January 31, 2018
0.37
N/A
Sharp's incremental borrowing rate is 12 percent. The present
value factor for one month at an...
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to...
On October 1, 2017, Sharp Company (based in Denver, Colorado)
entered into a forward contract to sell 100,000 rubles in four
months (on January 31, 2018) and receive $39,000 in U.S. dollars.
Exchange rates for the ruble follow:
Date
Spot Rate
Forward Rate
(to January 31, 2018)
October 1, 2017
$
0.35
$
0.39
December 31, 2017
0.38
0.41
January 31, 2018
0.40
N/A
Sharp's incremental borrowing rate is 12 percent. The present
value factor for one month at an...
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to...
On October 1, 2017, Sharp Company (based in Denver, Colorado)
entered into a forward contract to sell 200,000 rubles in four
months (on January 31, 2018) and receive $98,000 in U.S. dollars.
Exchange rates for the ruble follow:
Date
Spot Rate
Forward Rate
(to January 31, 2018)
October 1,
2017
$
0.45
$
0.49
December 31,
2017
0.48
0.51
January 31,
2018
0.50
N/A
Sharp's incremental borrowing rate is 12 percent. The present
value factor for one month at an...
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to...
On October 1, 2017, Sharp Company (based in Denver, Colorado)
entered into a forward contract to sell 230,000 rubles in four
months (on January 31, 2018) and receive $119,600 in U.S. dollars.
Exchange rates for the ruble follow:
Date
Spot Rate
Forward Rate
(to January 31, 2018)
October 1,
2017
$
0.48
$
0.52
December 31,
2017
0.51
0.54
January 31,
2018
0.53
N/A
Sharp's incremental borrowing rate is 12 percent. The present
value factor for one month at an...
On November 1, 2014, Moddel Company (a U.S. corporation) entered into a 90-day forward contract to...
On November 1, 2014, Moddel Company (a U.S. corporation) entered
into a 90-day forward contract to purchase 200,000 British pounds.
The purpose of the forward contract is to hedge a commitment to
purchase special equipment on January 30, 2015 from a British firm
Jeckyl, Inc. The invoice price on the purchase commitment is
denominated in British pounds. The forward contract is not settled
net. Assume Moddel uses a 12% interest rate. Use a fair value
hedge.
The relevant exchange rates...
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