EBK FINANCIAL ACCOUNTING THEORY AND ANA
12th Edition
ISBN: 9781119299646
Author: CATHEY
Publisher: JOHN WILEY+SONS,INC.-CONSIGNMENT
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Chapter 5, Problem 5.5C
To determine
Introduction: Revenue recognition is form of Generally Accepted Accounting Principles which identifies ideal conditions in which revenue is accepted and finally deciding on resolving the purpose.
To explain: Five-step process for revenue recognition
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Students have asked these similar questions
On Oct 1, 2015, Short company ordered some equipment from a supplier for 200,000 euros. Delivery and
payment will occur on Nov 30, 2016. The spot rates on Oct 1 and Nov 30 are $1.50 and $1.30
If the forward contract is acquired, what is the overall exchange gain or loss?
a.
$30,000 gain
O b. $10,000 gain
50
O d. $10,000 loss
Question: What is the impact on 2020 net income?
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 14,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 14,000 dinars on March 1, 2021.
Relevant exchange rates for the dinar on various dates are as follows:
Date
Spot Rate
Forward Rate(to March 1, 2021)
December 1, 2020
$
3.20
$
3.275
December 31, 2020
3.30
3.400
March 1, 2021
3.45
N/A
Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable.
Euro Aviation signed a purchase commitment for jet fuel in Year 1 for in the amount of $10,000,000.
The fuel is to be delivered in Year 2. At December 31, Year 1 the market value of the contract is
$11.200,000 due to an increase in jet fuel prices. It is expected the gain will be realized in Year 2 as
jet fuel is delivered.
1. Describe how Euro Aviation may account for this contract at the end of Year 1 under IFRS (Is
there more than one option and specifically what are they)?
2. Describe how Euro Aviation may account for this contract at the end of Year 1 under US GAAP?
Chapter 5 Solutions
EBK FINANCIAL ACCOUNTING THEORY AND ANA
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