Valix Finacc vol 1 Problem 14-21 to 25

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 14-21 to 25

Problem 14-21

Question 1  Answer  B

The notional figure is 8,000 kilos and the notional value is 8,000 kilos times the underlying

Fixed price of P1,200 per kilo or P9,600,000.

   

Question 2  Answer  C

Market price – 12/31/2008                                                                                                1,500

Underlying fixed price                                                                                                       1,200

Derivative asset                                                                                                                   300

Forward contract receivable (8,000 x 300)                                                                 2,400,000

Present value of derivative asset (2,400,000 x .91)                                                      2,184,000

The present value of P2,184,000 is recognized as forward contract receivable on December 31, 2008 because the amount is collectible on January 1, 2010, one year from December 31, 2008.

Question 3  Answer  B

Market price – 12/31/2009                                                                                               1,000

Underlying fixed price                                                                                                      1,200

Derivative liability                                                                                                               200

Forward contract payable – 12/31/2009 (8,000 x 200)                                   1,600,000

Problem 14-22  Answer  C

Fair value of call option (120 – 100 = 20 x 10,000)                                                        200,000

Problem 14-23  Answer  B

Exchange rate on July 31 (80,000,000 / 92)                                                                  869,565

Strike price (80,000,000 / 100)                                                                                       800,000

Derivative asset                                                                                                             69,565

Call option payment                                                                                                    10,000

Saving                                                                                                                           59,565

Problem 14-24

Question 1  Answer  A

Camry’s payment to Corolla (5,000,000 x 2%)                                                             100,000

Question 2  Answer  C

Fair value of interest rate swap (100,000 x .926)                                                            92,600

                                   

Problem 14-25  Answer  C

Notional amount                                                                                                        435,000

Exchange rate on December 31, 2008 (47,850,000 / 115)                                            416,087

Fair value of forward contract receivable                                                                    18,913

Valix Finacc vol 1 Problem 14-20

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 14-20

   2008

Dec.    31   Forward contract receivable                                              50,000

                        Unrealized gain – forward contract ($50,000 x P1)                                50,000

   2009

March 31   Forward contract receivable                                            100,000

                        Unrealized gain – forward contract ($50,000 x P2)                              100,000

31   Cash                                                                                 150,000

                        Forward contract receivable                                                              150,000

            31   Purchases ($50,000 x P43)                                                2,150,000

                        Cash                                                                                                  2,150,000

            31   Unrealized gain – forward contract                                 150,000

                        Purchases                                                                                            150,000

Valix Finacc vol 1 Problem 14-19

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 14-19

   2008                                                                                                                         

Sept.    1   Equipment                                                                        2,250,000

                        Accounts payable                                                                             2,250,000

Dec.   31   Loss on foreign exchange                                                    50,000

                        Accounts payable                                                                                 50,000

                 Peso equivalent – 12/31/2008                                                                   2,050,000

                 Peso equivalent – 09/01/2008                                                                   2,000,000

                 Loss on foreign exchange                                                                             50,000

           31   Forward contract receivable                                              50,000

                        Gain on forward contract                                                                    50,000           

   2009

March  1   Loss on foreign exchange                                                   100,000

                        Accounts payable                                                                               100,000

                 Peso equivalent – 3/1/2009                                                                                  2,150,000

                 Peso equivalent – 12/31/2008                                                                   2,050,000

                 Loss on foreign exchange                                                                           100,000

            1   Forward contract receivable                                             100,000

                        Gain on forward contract                                                                  100,000

            1    Cash                                                                                  150,000

                        Forward contract receivable                                                              150,000

            1    Accounts payable (50,000 x 43)                                       2,150,000

                        Cash                                                                                                  2,150,000

Valix Finacc vol 1 Problem 14-18

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 14-18

  2008

Dec.  1   Put option                                                                             100,000

                        Cash                                                                                                    100,000

  2009

Feb.  1   Cash (50,000 x 180)                                                               9,000,000

                        Sales                                                                                                  9,000,000

         1    Loss on put option                                                                100,000

                        Put option                                                                                           100,000              

       With the price above the put option price, on the part of the

        seller, there is no reason to exercise the option. It is better to

        sell the product on the open market. Thus, the output option

        is not exercised on February 1, 2009 and has no value.

Valix Finacc vol 1 Problem 14-17

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 14-17

   2008

Dec.  1   Call option                                                                              20,000

                        Cash                                                                                                      20,000

Dec. 31   Call option                                                                           380,000

                        Unrealized gain - call option                                                               380,000

                Fair value (200,000 x 2)                                                                                 400,000

                Payment for call option                                                                                20,000

                Increase                                                                                                       380,000

                                                                                           

   2009

June    1   Call option                                                                          200,000

                        Unrealized gain – call option                                                              200,000

                 Call option – 6/1/2009 (200,000 x P3)                                                          600,000

                 Call option – 12/31/2008                                                                            400,000

                 Increase in derivative asset                                                                        200,000

            1    Cash                                                                                  600,000

                        Call option                                                                                          600,000

            1    Purchases (200,000 x P28)                                                 5,600,000           

                        Cash                                                                                                  5,600,000           

            1    Unrealized gain – call option                                            600,000

                        Gain on call option                                                                             600,000

Valix Finacc vol 1 Problem 14-16

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 14-16

Requirement 1

   2008

Dec. 31   Call option                                                                             50,000

                        Cash                                                                                                      50,000

   2009

July     1   Call option                                                                          700,000

                        Gain on call option                                                                             700,000

                Fair value of call option (150,000 x 5)                                                          750,000

                Payment for call option                                                                                50,000

                Increase                                                                                                       700,000

   2009

July     1    Cash                                                                                   750,000

                        Call option                                                                                          750,000

           1    Purchases                                                                          5,250,000

                        Cash (150,000 x 35)                                                                            5,250,000

 

Requirement 2

   2008

Dec. 31   Call option                                                                             50,000

                        Cash                                                                                                      50,000

   2009

July    1   Purchases                                                                            4,200,000

                        Cash (150,000 x 28)                                                                            4,200,000

          1   Loss on call option                                                                 50,000

                        Call option                                                                                            50,000

Valix Finacc vol 1 Problem 14-15

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 14-15

   2008

Dec. 31   Unrealized loss – futures contract                                         125,000

                        Futures contract payable (25,000 x 5)                                                  125,000

   2009

June   1   Unrealized loss – futures contract                                           75,000

                        Futures contract payable                                                                      75,000

                Futures contract payable – 6/1/2009 (25,000 x P8)                                      200,000

                Futures contract payable – 12/31/2008                                                       125,000

                Increase in derivative liability                                                                        75,000

           1    Futures contract payable                                                   200,000

                        Cash                                                                                                    200,000

           1    Purchases (25,000 x 42)                                                      1,050,000

                        Cash                                                                                                 1,050,000

           1    Loss on futures contract                                                     200,000

                        Unrealized loss – futures contract                                                        200,000