What is the dollar amount paid by oil and gas

Reference no: EM132019962

Question: On November 15, 2013, Oil&Gas Inc. imported 500,000 barrels of oil from an oil company in Venezuela. Oil&Gas agreed to pay 50,000,000 bolivars on January 15, 2014. To ensure that the dollar outlay for the purchase will not fluctuate, the company entered into a forward contract to buy 50,000,000 bolivars on January 15 at the forward rate of $0.0269. Exchanges rates on various dates were:

November 15, 2013: Spot Rate = $0.0239 ; Forward Rate 1/15 Delivery = $0.0269

December 31, 2013: Spot Rate = $0.0224 ; Forward Rate 1/15 Delivery = $0.0254

January 15, 2014: Spot Rate = $0.0291

Oil&Gas properly account for the transaction as Fair Value Hedge. The 15-day present value factor is 0.9934.

Required: 1) Record the journal entries needed by Oil&Gas on November 15, December 31 and January 15. Round all entries to the nearest whole dollar.

2) Answer the following questions:

a. Indicate the amount of the discount or premium at which the foreign currency was original sold in the foreign currency market.

b. What is the dollar amount paid by Oil&Gas on January 15, 2014?

c. What is the accumulated net impact on Oil&Gas's Stockholder equity related to this transaction at January 15, 2014?

d. What would have been the dollar amount paid by Oil&Gas to settle the account payable had Oil&Gas not hedged the purchase contract with the forward contract?

e. What would have been the accumulated net impact on Oil&Gas's Stockholder equity related to this transaction on January 15, 2014 if Oil&Gas had not entered in the Forward Contract? Was Oil&Gas better off or worse off with the derivative contract?

Reference no: EM132019962

Questions Cloud

Prepare an income statement : Foundations of Accounting Assignment - The University of Texas at Austin McCombs School of Business - USA. Prepare an income statement

What is the present value of the annual cash flows : What is the present value of the annual cash flows for each of the three projects? (Round your answers to the nearest dollar amount).

Estimate the net present value of the project : NPV and financing. Louisville Co. is a U.S. firm considering a project in Austria which it has an initial cash outlay of $7 million.

Prepare statement of cash flows for senoro : Issued $1 par Common Stock for 150000 cash. Prepare Statement of Cash Flows for Senoro Co. for period ending Dec 31

What is the dollar amount paid by oil and gas : On November 15, 2013, Oil&Gas Inc. imported 500,000 barrels of oil from an oil company in Venezuela. Oil&Gas agreed to pay 50,000,000 bolivars.

Calculate how much pay for one share of stock : Nu-Tek, Inc. recently announced that they will pay their first annual dividend next year in the amount of $.50 a share.

Briefly describe how the asset and liability sections change : BRIEFLY describe how the asset and liability sections of Mr. Speakers' balance sheet would change if the FASB passed and implemented the exposure draft

Create an amortization table for a new car loan : Create an amortization table in Excel for a new car loan for 30,000 for three years at 5%. Determine the total amount of interest you will pay on this loan.

Find a specific event and its details : Numerous corporate scandals occurred in the decade leading up to the financial crisis that began in 2007 and lasted into 2009.

User Account

All Pages