Reference no: EM133187122

Question - Pinoy, Inc imports machinery from a foreign supplier. On June 1, the company received delivery of the machinery with a cost of 450,000 foreign currency when the spot rate was 1FC= P1.370 Pinoy had paid 50,000FC when the spot rate was 1FC P1.350 at the time of placing the order, and the balance was due in 60 days after delivery. On June 15, Pinoy purchase an option to buy FC on July 31 at a strike price of 1FC= P1.375. The hedge was designated as a fair value hedge. At the time of the purchase the out-of-the-money option has a value of P1,400 and a value of P2,600 at June 30. FC spot rates are as follows:

June 15 1 FC = P1.373

June 30 1 FC = P1.381

July 31 1 FC = P1.385

On July 31, the option was settled and the foreign currency was remitted to the foreign supplier.

1. What is the net forex gain (loss) on the purchase of machinery?

a. P(6,000)

b. P6,000

c. P(1,600)

d. P(4,400)

Q2. Refer to previous problem, what is the net gain (loss) on option?*

a. P(1,200)

b. P(1,400)

c. P(2,600)

d. P2,600

Q3. Refer to previous problem, what is the cost of the machinery in the statement of financial position on July 31?

a. P615,500

b. P607,000

c. P616,000

d. P548,000