Reference no: EM131292132
A New Zealand company has a foreign denominated asset in United States dollars worth US$600,000 on the 1 July 2016. The US debtor is due to repay this debt to the New Zealand company over the next 12 months. The repayments are scheduled to take place during the following date. The Spot rate is NZ$ = US$0.72 and the indicative future spot rates are shown in the table below.
Installment 1: 1 October, 2016 (US$150,000) (NZ$ = US$0.71)
Installment 2: 1 January, 2017 (US$150,000) (NZ$ = US$0.73)
Installment 3: 1 April, 2017 (US$150,000) (NZ$ = US$0.75)
Installment 4: 1 July 2017 (US$150,000) (NZ$ = US$0.77)
Question: Assume the company are able to partner with another company to secure a swap contract that is potentially beneficial to both parties. Prepare the journal entries to capture the swap contract for the first and second installment.
Other Information: Assume the swap contract between the two parties is exactly matched so that their exposure is exactly offset. When calculating the journal entries, assume the future spot rates are as provided in the above table. The US borrowing rate is 5% while the New Zealand deposit rate is 4%.
|
Use the degree of total leverage
: Breakeven point and all forms of leverage..... question e. Use the degree of total leverage (DTL) concept to determine the effect (in percentage terms) on a 50% increase inTOR's sales feom the $750,000 base level on its earnings per share.
|
|
Consider manufacturing company in an environmnet
: Consider a manufacturing company in an environmnet in which the overall business conditions are declining. What are the major risks associated with the inventory account balance? Explain how those risks would affect the auditor's approach to auditing..
|
|
Potential inventory obsolescence or receivables problems
: What background information might be useful to the auditor in planning the audit to assist in determining whether the client has potential inventory obsolescence or receivables problems? Identify the various sources the auditor would utilize to devel..
|
|
What does a literal interpretation of setting audit risk
: A recent graduate of an accounting program went to work for a large international firm and noted that the firm sets audit risk at 5% for all major engagements. What does a literal interpretation of setting audit risk at 5 % mean? How could an audit f..
|
|
Prepare the journal entries to capture swap contract
: A New Zealand company has a foreign denominated asset in United States dollars worth US$600,000 on the 1 July 2016. The US debtor is due to repay this debt to the New Zealand company over the next 12 months. Assume the company are able to partner wit..
|
|
Prepare the journal entries and adjusting entries
: Wally’s Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Prepare the February journal entries and adjusting entries:
|
|
Allocate the fixed costs to the three divisions
: Nairobi shopping mall gives the following data: Hotel Restaurant Shopping Centre Revenues 8,000,000 3,000,000 6,000,000 Direct costs 4,500,000 1,500,000 2,000,000 Floor space (square feet) 40,000 8,000 32,000 Number of employees 200 50 250 Total fixe..
|
|
How is expense best treated on his current year tax return
: During the current year Clifton, a corporate CEO, took a two-week seminar at the National Strategy Association on strategic planning in order to improve his strategic planning skills. The tuition and fees totaled $14,000, which he paid out-of-pocket ..
|
|
Deducted on his tax return for the current year
: Fastow, a corporate executive, incurred and paid the following business-related unreimbursed expenses in the current year: Assuming that Fastow does not itemize deductions, how much of these expenses can be deducted on his tax return for the current ..
|