Reference no: EM132973510
On October 2, 20x9, AST, Inc. ordered a custom-built passenger van from a Japanese firm. The purchase order is non-cancelable. The purchase price is 1,000,000 yens with delivery and payment to be on March 31, 20y0. On October 2, 20x9, AST, Inc. entered into a forward contract to buy 1,000,000 yens on March 31, 20y0 for P.5 3. On March 31, 20y0, the custom-built passenger van was delivered.
10/2/20x9 12/31/20x9 3/31/20y0
Spot rate (rupee) P.50.5 6 P .57
Forward rate (rupee) 53 .58 .57
Accounted for as Fair Value Hedge
Problem 1. The December 31, 20x9 profit and loss statement, net foreign exchange gain or loss (forward contract and commitment):
Problem 2. The Firm Commitment account balance as shown in the December 31, 20x9 balance sheet amounted to:
Problem 3. What is the fair value of the forward contract on December 31, 20x9?
Problem 4. What is the fair value of the forward contract on March 31, 20y0?
Problem 5. The Firm Commitment account balance on March 31, 20y0 amounted to:
Problem 6. The value of the equipment on March 31, 20y0 if the firm commitment account will be adjusted to asset acquired:
Problem 7. The value of the equipment on March 31, 20y0 if the firm commitment account will be will be a separate adjustment to net income::
Accounted for as Cash Flow Hedge
Problem 8. The December 31, 20x9 profit and loss statement, foreign exchange gain or loss on hedged item/commitment amounted to:
Problem 9. The December 31, 20x9 foreign exchange gain or loss on the hedging instrument (forward contract)
amounted to:
a. P50,000 gain, other comprehensive income
b. P50,000 gain, current earnings
c. P60,000 loss, other comprehensive income
d. P60,000 gain, current earnings
Problem 10. The Firm Commitment account balance on March 31, 20y0 amounted to:
Problem 11. The value of the equipment on March 31, 20y0 assuming that AST, Inc. has elected to adjust the cost of
non-financial items acquired: