User Account

All Pages

What was the net impact on jensen company

Assignment Help Financial Accounting
Reference no: EM132554135

On September 1, 2015, Jensen Company received an order to sell a machine to a customer in Canada at a price of 100,000 Canadian dollars. Jensen shipped the machine and received payment on March 1, 2016. On September 1, 2015, Jensen purchased a put option giving it the right to sell 100,000 Canadian dollars on March 1, 2016, at a price of $80,000. Jensen properly designated the option as a fair value hedge of the Canadian dollar firm commitment. The option cost $2,000 and had a fair value of $2,300 on December 31, 2015. The fair value of the firm commitment was measured by referring to changes in the spot rate. The following spot exchange rates apply:

Date - US $ per Canadian $:

Sep 1, 2017 - .80

Dec 31, 2017 - .79

March 1, 2018 - .77

Jensen Company's incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803.

Question 1: What was the net impact on Jensen Company's 2015 income as a result of this fair value hedge of a firm commitment?

A. -0-

B. 680.3 decrease in income

C. 300 increase in income

D. 980.3 increase in income

Question 2: What was the net impact on Jensen Company's 2016 income as a result of this fair value hedge of a firm commitment?

A. 0

B. 1319.7 decrease in income

C. 77980.3 increase in income

D. 78680.3

Question 3: What was the net increase or decrease in cash flow from having purchased the foreign currency option to hedge this exposure to foreign exchange risk?

A. 0

B. 1,000 increase in cash flow

C. 1500 decrease in cash flow

D. 3000 increase in cash flow

Reference no: EM132554135

Questions Cloud

What amount will the bondholder receive on the bond : A $1,000 par value bond with a fixed 10% rate of interest pays coupons semiannually. What amount will the bondholder receive on the bond's maturity date?
Prepare the stockholders equity section of the balance sheet : Using the following accounts and balances, prepare the Stockholders' Equity section of the balance sheet. Common Stock, $50 par $1,500,000
What is the holding period return for the year on a bond : What is the holding period return for the year on a bond with a par value of $1,000 and a coupon rate of 8.5% if its price at the beginning?
Overall usefulness of video : In search bar, type in ionic and covalent bonding Something new that you learned about bonding.
What was the net impact on jensen company : What was the net increase or decrease in cash flow from having purchased the foreign currency option to hedge this exposure to foreign exchange risk?
Discuss the importance of ethics in accounting : Question - Discuss the importance of ethics in accounting. Why is it important for accountants to maintain high ethical standards
What is Timber Ridges net profit margin : The Timber Ridge Company has the following relationships: Sales/Total assets = 3.88; ROA = 0.1050. What is Timber Ridge's net profit margin
Determine which rate of return investor expect to receive : Find Which rate of return does the investor expect to receive on this stock id the stock is purchased today? Round the answer to two decimal places.
Which accounts -balance sheet are potentially affected : Which accounts -balance sheet and income statement- are potentially affected by the fraud in Marina Nursing Home

Reviews

Write a Review

Financial Accounting Questions & Answers

  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..

  Customers are given a bigger discount for cash transactions

What impact will each of the following events have upon a firm’s cash conversion period (that is, will the CCP increase, decrease, remain the same): Customers are given a bigger discount for cash transactions.

  Journalize the entries for the completion of the two jobs

During the current month, Reyes Corporation completed Job 310 and Job 312. Job 310 cost $59,990 and Job 312 cost $53,250. Job 312 was sold on account for $86,890. Journalize the entries for the completion of the two jobs and the sale of Job 312. (Cre..

  Does the company must make the piece or buy

Radisson Manufacturing Corp. The company uses 10,000 units of the 300th piece as a component to assemble one of its products. An external supplier offers to supply this piece for $ 16 per unit. If the company stops production of this piece, you can a..

  Calculate equivalent units for materials-conversion costs

Equivalent Units and Related Costs; Cost of Production Report; Entries Wilmington Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. Calculate equivalent unit..

  Compute the activity rate for each activity cost pool

Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 10%. Comp..

  How would transaction be handled on statement of cash flows

The Bodner Corporation sold a machine with a cost of $10,000 and accumulated depreciation of $6,000 for a selling price of (a) $7,000; (b) $2,000. How would this transaction be handled on the statement of cash flows?

  Dividends declared goes to the preferred shareholders

GHI Company has the following stock outstanding: How much of the $200,000 of dividends declared goes to the Preferred Shareholders? How much of the $200,000 of dividends declared goes to the Common Shareholders?

  The budgeted production units for july are

The company wants to end each month with ending finished goods inventory equal to 20% of the next month's sales.- The budgeted production units for July are:

  Prepare the cash budget for the month ending

Daniel Merrill is the manager of an airport gift shop, Merrill News and Gifts. From the following data, Mr. Merrill wants a cash budget showing expected cash receipts and disbursements for the month of April, and the cash balance expected as of Ap..

  What is the firms weighted average cost of capital

A firm's target capital structure consists of 40 percent debt, 5 percent preferred stock, and 55 percent common equity. The firm’s cost of debt is 10%, the cost of preferred stock is 11.26%, and the cost of equity is 14 %. What is the firm's weighted..

  Make an adjusting entry involving cash account

What are adjusting entries and why are those necessary? When do you prepare adjusting entries? Will you ever make an adjusting entry involving Cash account?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd