On March 1, 20X2, McBride Ltd -Assume That the Transaction Qualifies as a Fair-Value Hedge

question 9

Multiple Choice

On March 1, 20X2, McBride Ltd. issued a purchase order to Tao Heavy Machines (Singapore) Inc. to acquire a drilling machine for $400,000 SGD. On the same day, McBride entered into a forward contract to receive $400,000 SGD on July 31, 20X2. The machine was delivered on June 1, 20X2, and payment was made July 31, 20X2. McBride has an April 30 year-end. The following information has been provided: $\begin{array}{|l|c|c|}\hline \text { Date } & \text { Spot Rate } & \text { Forward rate to July } 31,20 \times 2 \\\hline \text { March } 1,20 \times 2 & .7686 & .7810 \\\hline \text { April } 30,20 \times 2 & .7702 & .7818 \\\hline \text { June } 1,20 \times 2 & .7940 & .7985 \\\hline \text { July } 31,20 \times 2 & .7995 & \text { n/a }\\\hline \end{array}$

-Assume that the transaction qualifies as a fair-value hedge. At what amount should McBride record the drilling machine?

• A)$307,440
• B)$312,400
• C)$317,600
• D)$319,800

---

Definitions:

Canning Department

A division within a production facility where products are canned for preservation and future sale.

Process Cost Summary

A report detailing the total cost and production information in a process costing system, used to calculate cost per equivalent unit.

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for "First In, First Out."

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, expressing the amount of work done in terms of fully completed units.