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11 Cards in this Set
- Front
- Back
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9 Accounts I will need to use for Forward Contract-Cash flow
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1. Sales
2. AOCI 3. AR 4. Foreign Contract 5. Gain/Loss on Foreign contract 6. Gain/Loss on Foreign exchang 7. Discount expense or Amortization of Premium 8. Cash 9. Foreign Currency |
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Steps to record Sale, Year End, Closing.
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Record Sale, Change in AR, Change in FC, Move gain/loss on FC, Amor/Disc, at collection then: Change in AR, Change in FC, Move Gain/Loss of FC, Amor/Disc, Close AR, Close FC
Follow along on pg 309 for a gain then loss on exchange |
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Make a Impact on Income Income statement
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Sales (but not for year 2)
G/L FE G/L FC Net 0 Dis/Prem Impact---------(goes to IS) |
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Make an impact on Balance Sheet Statement
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-Year 1-
Assets: AR balance ?FC? Liabilities: ?FC? Equity: AOCI RE |
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Impact on Balance Sheet year two for forward contract cash
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Assets:
Cash increases RE: Increases with cash This is not complete |
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Calculate the Premium/Discount
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Spot rate on day of contract - Strike price of forward contract
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Calculate PV for?
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Only for the FV of Forward Contract. Remember to check number of months to go before contract is executed.
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Direct Quote
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Gives the exchange rate in $ v/s the indirect quote in foreign currency.
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Strike price
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Price at which the contract is settled
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Foreign Currency options
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give the right but not the obligation to purchase foreign currency at a predetermined price.
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Forward Rate > Spot Rate means selling at a
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Premium
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