Question

Please answer only if you are sure about the solution. On 1 Nov 2016, Burwood Limited...

Please answer only if you are sure about the solution.

On 1 Nov 2016, Burwood Limited based in Australia ordered inventories to the value of US $ 3000000 on FOB destination terms. The goods are shipped on 1 April 2017 and are paid for on 30 June 2017. Burwood Limited also entered into a forward exchange contract of  US $ 3000000 on 1 Nov 2016 with NYC Bank in which NYC Bank agrees to supply Burwood Limited with US $ 3000000 on 30 June 2017. Burwood Limited has a FY ending on 31 Dec.

Additional information on exchange rates

Date Spot Rate Forward Rate
1.11.2016 A$1 = US $ 0.89 A$1 = US $0.84
31.12.2016 A$1 = US $0.86 A$1 = US $0.82
1.04.2017 A$1 = US $0.85 A$1 = US $0.79
30.06.2017 A$1 = US $ 0.80 A$1 = US $ 0.80

Management adopts cashflow hedge accounting.

Required:

Prepare a table showing gain/losses on the hedging instrument (the forward rate contract ) and also provide necessary journal entries to record the above transactions from 1.11.2016 to 30.06.2017

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
ON 1st march 2016, kilima limited exports goods to the USA firm RACHEL Inc. The USA...
ON 1st march 2016, kilima limited exports goods to the USA firm RACHEL Inc. The USA FIRM IS DUE TO PAY $2140000 IN SIX months’ time to august 2016.kilima limited is concerned that the US DOLLAR weakens against the Kenyan shillings before us dollar is received. Exchange rates Spot rate                                        KES101.50/$1     -     KES103.50/$1 Forward rates Six months forward                      KES97.20/$1       -       KES 99.50/$1 Nine months forward                 KES 95.40/$1      -         KES 97.50/$1 Interest rates Kenya shillings six months’ rate          16.5%   -                20.25%...
Our firm purchased equipment for 200,000 Artemedal dollars (AD$) on December 1, 2016. Our year end...
Our firm purchased equipment for 200,000 Artemedal dollars (AD$) on December 1, 2016. Our year end is December 31, and the payable is due on February 28, 2017. On December 1, 2016, we entered into a forward exchange contract with the bank to provide us with 200,000 ADs on February 28, 2017. This is classified as a fair value hedge.   The following rates were in effect: Forward Rates:   December 1, 2016; 90 day forward rate AD$1 = CDN$ .62 December...
Please only answer if you are 100% sure and I need the answers now. QUESTION 16...
Please only answer if you are 100% sure and I need the answers now. QUESTION 16 Suppose that the current dollar/peso exchange rate is $.12/peso, but both the US and Mexican central banks believe that the exchange rate should be 9 pesos/$. If both nations decide to use sterilized market intervention to achieve the desired exchange rate, which of the following will occur? The Mexican central bank will sell dollars, buy pesos, and conduct an open market sale of Mexican...
Rizzo Company (RC) has GBP 1 million receivables due in one year. While the current spot...
Rizzo Company (RC) has GBP 1 million receivables due in one year. While the current spot price of GBP is USD 1.31, RC expects the future spot rate of British pound to fall to approximately $1.25 in a year so it decides to avoid exchange rate risk by hedging these receivables. The strike price of American-style put options are $1.29. The premium on the put options is $.02 per unit. Assume there are no other transaction costs. Finally, there is...
Code GEL ASX All Ordinary change% 2016/12/30 22.09 5719.1 2017/1/2 22.09 5719.1 0.00% 2017/1/3 22.51 5784.6...
Code GEL ASX All Ordinary change% 2016/12/30 22.09 5719.1 2017/1/2 22.09 5719.1 0.00% 2017/1/3 22.51 5784.6 1.15% 2017/1/4 22.32 5788.2 0.06% 2017/1/5 22.37 5805.1 0.29% 2017/1/6 22.21 5809 0.07% 2017/1/9 22.38 5857.7 0.84% 2017/1/10 22.16 5813 -0.76% 2017/1/11 22.14 5823.7 0.18% 2017/1/12 21.98 5821.6 -0.04% 2017/1/13 22.03 5776.8 -0.77% 2017/1/16 22.18 5803 0.45% 2017/1/17 22.17 5754.7 -0.83% 2017/1/18 22.24 5733.7 -0.36% 2017/1/19 22.55 5745.4 0.20% 2017/1/20 22.77 5709.7 -0.62% 2017/1/23 22.33 5668 -0.73% 2017/1/24 22.41 5706.3 0.68% 2017/1/25 22.24 5726...
Background You are a manager in the audit division at Miller Yates Howarth (MYH), an accounting...
Background You are a manager in the audit division at Miller Yates Howarth (MYH), an accounting firm with offices throughout the major regional centres of NSW and Queensland. Although a medium sized firm by national standards, MYH is the second largest regional accounting firm in Australia. Most of MYH’s audit clients are in the agriculture, mining, manufacturing and property industries. All of those industries are currently under pressure, either from a downturn in commodity prices or fierce competition from overseas...
You are a manager in the audit division at Miller Yates Howarth (MYH), an accounting firm...
You are a manager in the audit division at Miller Yates Howarth (MYH), an accounting firm with offices throughout the major regional centres of NSW and Queensland. Although a medium sized firm by national standards, MYH is the second largest regional accounting firm in Australia. Most of MYH’s audit clients are in the agriculture, mining, manufacturing and property industries. All of those industries are currently under pressure, either from a downturn in commodity prices or fierce competition from overseas competitors....
Please don't copy and paste from other website. Outline the key fiscal and monetary policy actions,...
Please don't copy and paste from other website. Outline the key fiscal and monetary policy actions, respectively, of New Zealand against the COVID-19 shocks(already outlined below) use appropriate macroeconomic models and theories covered in this course to explain their expected impacts. Discuss any limitations of these policy actions. (~600 words) TIPS: ⮚ If there are many policy actions, you could list all of them but focus on the key ones for discussion. ⮚ The government may take multiple actions (e.g....
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how the firms resources incompetencies support the given pressures regarding costs and local responsiveness. Describe entry modes have they usually used, and whether they are appropriate for the given strategy. Any key issues in their global strategy? casestudy: Atlanta, June 17, 2014. Sea of Delta employees and their families swarmed between food trucks, amusement park booths, and entertainment venues that were scattered throughout what would...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT