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Buscom Activity 11227979968

Ariane Corporation purchased an industrial printer from a German company for €10,000 on November 29, 2021. The printer was received on December 15, 2021 and the payment was made on January 3, 2022. Using the exchange rates provided, the equipment to be reported is P550,000. The accounts payable for 2021 is P600,000. There is a net foreign exchange loss of P10,000 to recognize at year end. The total net foreign exchange loss for the transaction is P20,000. The cash paid by Ariane on the settlement date is P610,000.

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89 views2 pages

Buscom Activity 11227979968

Ariane Corporation purchased an industrial printer from a German company for €10,000 on November 29, 2021. The printer was received on December 15, 2021 and the payment was made on January 3, 2022. Using the exchange rates provided, the equipment to be reported is P550,000. The accounts payable for 2021 is P600,000. There is a net foreign exchange loss of P10,000 to recognize at year end. The total net foreign exchange loss for the transaction is P20,000. The cash paid by Ariane on the settlement date is P610,000.

Uploaded by

dmangigin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

On November 29, 2021, Ariane Corporation placed a non-cancelable purchase


order with a company based in Germany to import an industrial printer for
€10,000. The contract term is FOB shipping point. The machine was shipped on
December 1, 2021 and was received by Ariane Corporation on December 15,
2021. The purchase price was settled on January 3, 2022.
The following are the exchange rates:

Date Exchange Rate Date Exchange Rate

November 29, P55 : €1 December 31, 2021 P60 : €1


2021

December 1, 2021 P58 : €1 January 3, 2022 P61 : €1

December 15, 2021 P57 : €1

1. How much is to be reported as equipment by Ariane?


[2] How much is the accounts payable for year ended 2021?
[3] How much is the net ForEx Gain (Loss) to be recognized at year end?
[4] How much is the total net ForEx gain (loss) for the transaction?
[5] How much is the cash paid by Ariane in the settlement date?
II.

On December 3, 2019, Firewolf company made an agreement with the local bank to enter into
numerous forward exchange contract to purchase 100,000 Indian Rupees (INR) in 120 days .
Given below are the important exchange rate for every 1 unit of INR:

Forward Rate
Spot Rate (For April 11,
2021)
November 30,
P 0.87 P 0.89
2019
December 3,
0.88 0.90
2019
December 31,
0.92 0.93
2019
The company also provided the following information:

 The first forward contract that Firewolf Company entered into was to hedge a purchase of
inventory in November 2019, payable in April 2020.
 The second forward contract has the purpose of hedging a commitment to purchase
machineries being manufactured to Firewall's unique standards. The expected delivery
date is on April 2020 at which the settlement is due to the manufacturer. The hedge
qualifies as a fair value hedge.
 The third and last forward contract was for speculation of Firewolf company on an
upcoming purchase transactions.

Question_1] What amount of Forex transaction gain from the forward contract in hedging the
purchase of transaction should Firewolf include in the 2019 net income?

[Question_2] At the balance sheet date, what amount of Forex transaction loss should Firewolf
include in income from the revaluation of the Accounts Payable of 100,000 Indian Rupees
incurred as a result of the purchase of inventory at November 30, 2019 payable in April 2020?

[Question_3] What amount of Forex transaction gain from the forward contract in hedging a
commitment to purchase a machinery should Firewolf include in the 2019 net income?

[Question_4] What amount of Forex transaction gain from the forward contract in hedging a
speculation should Firewolf include in the 2019 net income?

[Question_5] How much is the Forex transaction loss on the hedged item of the speculation that
Firewolf should have reported in 2019 net income?

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