E12-12

1. 50,000,000 x $.0269 = $1,345,000

2. 50,000,000 x $.0291 = $1,455,000
3. 50,000,000 x ($.0269 -$0239) = 150,000 Premium
4. Valuation - 11/15/2014 50,000,000 x$.0239 = $1,195,000
12/31/2014 50,000,000 x$.0224 = 1,120,000
Transacrion gain - 2014 $75,000

Valuation - 12/31/2014 $1,120,000

1/15/2015 50,000,000 x$.0291 = 1,455,000
Transacrion loss - 2015 $355,000

5. 2014 - Transaction loss $75,000

50,000,000 ($.0269) = $1,345,000
50,000,000 ($.0254) = $1,270,000
Transaction loss $75,000

2015 - Transaction gain $185,000

50,000,000 ($.0254) = $1,270,000
50,000,000 ($.0291) = $1,455,000
Transaction gain $185,000

E12-1
Apr. 3 Purchases 11.520
Account Payable (1,600,000 x $.0072)
5 Accounts Receivable 2.800
Sales
9 Accounts Receivable 16.800
Sales
11 Purchases 1,009,615
Accounts Payable (801,282 x $ 1,26)
16 Accounts Payable (1,000,000 x $.0072) 7.200
Transaction gain
Cash (1,000,000 x $ .0067)
18 Accounts Payable -
Transaction Loss 1,025,641
Cash (801,282 x $1,28)
22 Cash 16.800
Accounts Receivable
30 Accounts Payable (600,000 x $.0072) 4.320
Transaction Loss 360
Cash (600,000 x $.0078)

P12-12
Part A
Oct 1 Option to buy FC 4.000
 Cash

Nov 15 Option to buy FC 14.000

Foreign Exchange Gain
To adjust the option to its intrinsic value of $18,000
[300,000 x ($1.24 - $1.30)] or $18,000 - $4,000 = $14,000

Foreign Exchange Loss 14.000

Firm Commitment

Investment in FC (300,000 x $1.30) 390.000

Cash (300,000 x $1.24)
Option to buy FC ( Intrinsic value)

Equipment 376.000
Firm Commitment 14.000
Investment in FC (300,000 x $1.30)

Part B
Equipment (300,000 x $1.30) 390.000
Cash

123123123
 11.520

2.800

16.800

1,009,615

500
6.700

1,025,641

16.800

4.680
 4.000

14.000

14.000

372.000
18.000

390.000

390.000