ACCT 370 Read & Interact Revsine, Collins, Johnson, Mittelstaedt, Soffer Chapter 19 solution answers

ACCT 370 Read & Interact Revsine, Collins, Johnson, Mittelstaedt, & Soffer Chapter 19 solutions complete answers

 

One characteristic of a derivative is that

 

A forward contract

 

A futures contract differs from a forward contract in that

 

A company produces 250,000 bushels of corn and plans to sell the corn in January. If the company sells futures contracts for 250,000 bushels of corn for $5 per bushel,

 

A swap contract

 

A company enters into an interest rate swap that requires it to pay the LIBOR variable rate and receive a 5% fixed rate on a $1,000,000 notional value. If the LIBOR rate increases to 7%, The company would

 

To synthetically convert interest payments denominated in Yen to interest payments denominated in U.S. dollars, a company would enter into a swap contract where it

 

A company sells futures contracts for 250,000 bushels for $5 per bushel. Corn prices subsequently increase by $1. The value of the futures contract

 

Which of the following is not true of swap contracts?

 

In the absence of a hedging transaction, derivatives

 

A company enters into an interest rate swap that requires it to receive the LIBOR variable rate and pay a 6% fixed rate on a $1,000,000 notional value. If the LIBOR rate increases to 7%, The company would

 

When a derivative is accounted for under hedge accounting,

 

To synthetically convert interest payments denominated in U.S. dollars to interest payments denominated in Yen, a company would enter into a swap contract where it

 

Hedge effectiveness refers to

 

Which of the following are true of options?

 

A foreign currency exposure hedge protects against

 

Which of the following are true of accounting for stand-alone derivatives?

 

Jackson Company uses a futures contract to lock-in the $1,000,000 value of its cocoa inventory. The cocoa inventory value falls by $200,000, and the futures contract increases in value by $200,000. Jackson appropriately accounts for the futures contract as a fair value hedge. To record the change in the inventory and futures values, Jackson would

 

To convert synthetically floating rate debt to fixed rate debt, a company would enter into a swap agreement where it

 

A swap contract can result in

 

In September 2021, Lynd Company buys March 2022 futures contracts for 1,000,000 pounds of frozen concentrated orange juice that it needs for its production in 2022. Lynd has a December 31 calendar year. During 2021, both the price of orange juice and Lynd's futures contracts decline in value. If the futures contracts decline by $52,000 during 2021 and remain at the same level until the contract expires in March 2022, Lynd would

 

All of the following items could be hedged, except

 

______ is the derivative's ability to generate offsetting changes in the fair value or cash flows of the hedged item.

 

A fair value hedge protects against

 

Which of the following is true of hedge effectiveness?

 

Jackson company uses a futures contract to lock-in the $1,000,000 value of its cocoa inventory. The cocoa inventory value falls by $200,000, and the futures contract increases in value by $200,000. Jackson appropriately accounts for the futures contract as a fair value hedge. To record the change in the values of the futures contract and the inventory, Jackson would

 

Prince Company enters into an interest rate swap to convert variable rate debt to fixed rate debt. Under the swap, the firm agrees to receive variable and pay fixed on a notional amount of $1,000,000. Variable rates for the subsequent year are determined at the end of each year. At the end of the first year, the swap decreases in value by $125,000. To record the decline in the swap value under cash flow hedge accounting, Prince would

 

In September 2021, Lynd Company buys March 2022 futures contracts for 1,000,000 pounds of frozen concentrated orange juice that it needs for its production in 2022. Lynd has a December 31 calendar year. During 2021, both the price of orange juice and Lynd's futures contracts decline in value. If the futures contracts decline by $52,000 during 2021, Lynd would

 

Hedge effectiveness is

 

GAAP defines hedge effectiveness as which of the following?

 

All of the following items would qualify as hedging instruments, except

 

A company sells futures contracts for 250,000 bushels for $5 per bushel. Corn prices subsequently fall by $1. The value of the futures contract

 

An example of a cash flow hedge would be the use of

 

Prince Company enters into an interest rate swap to convert variable rate debt to fixed rate debt. Under the swap, the firm agrees to receive variable and pay fixed on a notional amount of $5,000,000. Variable rates for the subsequent year are determined at the end of each year. At the end of the second year, Prince makes a net payment of $50,000 on the swap. To record the payment under cash flow hedge accounting, Prince would

 

To convert synthetically fixed rate debt to floating rate debt, a company would enter into a swap agreement where it