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Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk – Fundamentals 7e
CHAPTER 7
FOREIGN CURRENCY TRANSACTIONS AND
HEDGING FOREIGN EXCHANGE RISK
Chapter Outline
I. In today’s global economy, a great many companies deal in currencies other than their
reporting currencies.
A. Merchandise may be imported or exported with prices stated in a foreign currency.
B. For reporting purposes, foreign currency balances must be stated in terms of the
company’s reporting currency by multiplying it by an exchange rate.
C. Accountants face two questions in restating foreign currency balances.
1. What is the appropriate exchange rate for restating foreign currency balances?
2. How are changes in the exchange rate accounted for?
D. Companies often engage in foreign currency hedging activities to avoid the adverse
impact of exchange rate changes.
E. Accountants must determine how to properly account for these hedging activities.
II. Foreign exchange rates are determined in the foreign exchange market under a variety of
different currency arrangements.
A. Exchange rates can be expressed in terms of the number of U.S. dollars to purchase one
foreign currency unit (direct quotes) or the number of foreign currency units that can be
obtained with one U.S. dollar (indirect quotes).
B. Foreign currency trades can be executed on a spot or forward basis.
1. The spot rate is the price at which a foreign currency can be purchased or sold today.
2. The forward rate is the price today at which foreign currency can be purchased or
sold sometime in the future.
3. Forward exchange contracts provide companies with the ability to “lock in” a price
today for purchasing or selling currency at a specific future date.
C. Foreign currency options provide the right but not the obligation to buy or sell foreign
currency in the future, and therefore are more flexible than forward contracts.
III. FASB ASC 830, Foreign Currency Matters, prescribes accounting rules for foreign currency
transactions.
A. Export sales denominated in foreign currency are reported in U.S. dollars at the spot
exchange rate at the date of the transaction. Subsequent changes in the exchange rate
until collection of the receivable are reflected through a restatement of the foreign
currency account receivable with an offsetting foreign exchange gain or loss reported in
income. This is known as a two-transaction perspective, accrual approach.
B. The two-transaction perspective, accrual approach also is used in accounting for foreign
currency payables. Receivables and payables denominated in foreign currency create
an exposure to foreign exchange risk; this is the risk that changes in the exchange rate
over time will result in a foreign exchange loss.
7-1
Copyright © 2018 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
IV. FASB ASC 815, Derivatives and Hedging, governs the accounting for derivative financial
instruments and hedging activities including the use of foreign currency forward contracts
and foreign currency options.
A. The fundamental requirement is that all derivatives must be carried on the balance sheet
at their fair value. Derivatives are reported on the balance sheet as assets when they
have a positive fair value and as liabilities when they have a negative fair value.
B. U.S. GAAP provides guidance for hedges of the following sources of foreign exchange
risk:
1. foreign currency denominated assets and liabilities.
2. unrecognized foreign currency firm commitments.
3. forecasted foreign denominated currency transactions.
4. net investments in foreign operations (covered in Chapter 10).
C. Companies prefer to account for hedges in such a way that the gain or loss from the
hedge is recognized in net income in the same period as the loss or gain on the risk being
hedged. This approach is known as hedge accounting. Hedge accounting for foreign
currency derivatives may be applied only if three conditions are satisfied:
1. the derivative is used to hedge either a cash flow exposure or fair value exposure to
foreign exchange risk,
2. the derivative is highly effective in offsetting changes in the cash flows or fair value
related to the hedged item, and
3. the derivative is properly documented as a hedge.
D. Hedge accounting is allowed for hedges of two different types of exposure: cash flow
exposure and fair value exposure. Hedges of (1) foreign currency denominated assets
and liabilities, (2) foreign currency firm commitments, and (3) forecasted foreign currency
transactions can be designated as cash flow hedges. Hedges of (1) and (2) also can be
designated as fair value hedges. Accounting procedures differ for the two types of
hedges.
E. For cash flow hedges of foreign currency denominated assets and liabilities, at each
balance sheet date:
1. The hedged asset or liability is adjusted to fair value based on changes in the spot
exchange rate, and a foreign exchange gain or loss is recognized in net income.
2. The derivative hedging instrument is adjusted to fair value (resulting in an asset or
liability reported on the balance sheet), with the counterpart recognized as a change
in Accumulated Other Comprehensive Income (AOCI).
3. An amount equal to the foreign exchange gain or loss on the hedged asset or liability
is then transferred from AOCI to net income; the net effect is to offset any gain or loss
on the hedged asset or liability.
4. An additional amount is removed from AOCI and recognized in net income to reflect
(a) the current period’s amortization of the original discount or premium on the forward
contract (if a forward contract is the hedging instrument) or (b) the change in the time
value of the option (if an option is the hedging instrument).
F. For fair value hedges of foreign currency denominated assets and liabilities, at each
balance sheet date:
1. The hedged asset or liability is adjusted to fair value based on changes in the spot
exchange rate, and a foreign exchange gain or loss is recognized in net income.
2. The derivative hedging instrument is adjusted to fair value (resulting in an asset or
liability reported on the balance sheet), with the counterpart recognized as a gain or
loss in net income.
7-2
G. Under fair value hedge accounting for hedges of foreign currency firm commitments:
1. the gain or loss on the hedging instrument is recognized currently in net income, and
2. the change in fair value of the firm commitment is also recognized currently in net
income.
This accounting treatment requires (1) measuring the fair value of the firm commitment,
(2) recognizing the change in fair value in net income, and (3) reporting the firm
commitment on the balance sheet as an asset or liability. A decision must be made
whether to measure the fair value of the firm commitment through reference to (a)
changes in the spot exchange rate or (b) changes in the forward rate.
H. Cash flow hedge accounting is allowed for hedges of forecasted foreign currency
transactions. For hedge accounting to apply, the forecasted transaction must be
probable (likely to occur). The accounting for a hedge of a forecasted transaction differs
from the accounting for a hedge of a foreign currency firm commitment in two ways:
1. Unlike the accounting for a firm commitment, there is no recognition of the forecasted
transaction or gains and losses on the forecasted transaction.
2. The hedging instrument (forward contract or option) is reported at fair value, but
because there is no gain or loss on the forecasted transaction to offset against,
changes in the fair value of the hedging instrument are not reported as gains and
losses in net income. Instead they are reported in other comprehensive income. On
the projected date of the forecasted transaction, the cumulative change in the fair
value of the hedging instrument is transferred from other comprehensive income
(balance sheet) to net income (income statement).
V. IFRS is very similar to U.S. GAAP with respect to the accounting for foreign currency
transactions and hedging of foreign exchange risk.
A. IAS 21 requires the use of a two-transaction perspective in accounting for foreign
currency transactions with unrealized foreign exchange gains and losses accrued in net
income in the period of exchange rate change.
B. IAS 39 allows hedge accounting for foreign currency hedges of recognized assets and
liabilities, firm commitments, and forecasted transactions when documentation
requirements and effectiveness tests are met. Hedges are designated as cash flow or
fair value hedges.
C. One difference between IFRS and U.S. GAAP relates to the type of financial instrument
that can be designated as a foreign currency cash flow hedge. Under U.S. GAAP, only
derivative financial instruments can be used as a cash flow hedge, whereas IFRS also
allows non-derivative financial instruments, such as foreign currency loans, to be
designated as hedging instruments in a foreign currency cash flow hedge.
D. Another difference relates to the accounting for the time value of a foreign currency option
used to hedge foreign exchange risk. Under IFRS, the time value of the option when
acquired is amortized to expense on a systematic and rationale basis. This is
accomplished by recognizing the change in time value of an option initially in AOCI, and
then immediately reclassifying a portion of the amount deferred in AOCI as option
expense.
7-3
Answer to Discussion Question
Do we have a gain or what? This case demonstrates the differing kinds of information provided
through application of current accounting rules for foreign currency transactions and derivative
financial instruments.
The Ahnuld Corporation could have received $200,000 [$2.00 x 100,000 tchecks] from its export
sale to Tcheckia if it had required immediate payment. Instead, Ahnuld allows its customer six
months to pay. Given the future exchange rate of $1.70, Ahnuld would have received only
$170,000 if it had not entered into the forward contract. This would have resulted in a decrease
in cash inflow of $30,000. In accordance with current accounting standards, the decrease in the
value of the tcheck receivable is recognized as a foreign exchange loss of $30,000. This loss
represents the cost of extending credit to the foreign customer if the tcheck receivable is left
unhedged.
However, rather than leaving the tcheck receivable unhedged, Ahnuld sells tchecks forward at a
price of $180,000. Because the future spot rate turns out to be only $1.70, the forward contract
provides a benefit, increasing the amount of cash received from the export sale by $10,000. In
accordance with current accounting standards, the change in the fair value of the forward contract
(from zero initially to $10,000 at maturity) is recognized as a gain on the forward contract of
$10,000. This gain reflects the cash flow benefit from having entered into the forward contract,
and is the appropriate basis for evaluating the performance of the foreign exchange risk manager.
(Students should be reminded that the forward contract will not always improve cash inflow. For
example, if the future spot rate were $1.85, the forward contract would result in $5,000 less cash
inflow than if the transaction were left unhedged.)
The net impact on income resulting from the fluctuation in the value of the tcheck is a loss of
$20,000. Clearly, Ahnuld forgoes $20,000 in cash inflow by allowing the customer time to pay for
the purchase, and the net loss reported in income correctly measures this. The $20,000 loss is
useful to management in assessing whether the sale to Tcheckia generated an adequate profit
margin, but it is not useful in assessing the performance of the foreign exchange risk manager.
The net loss must be decomposed into its component parts to fairly evaluate the risk manager’s
performance.
Gains and losses on forward contracts designated as fair value hedges of foreign currency assets
and liabilities are relevant measures for evaluating the performance of foreign exchange risk
managers. (The same is not true for cash flow hedges. For this type of hedge, performance
should be evaluated by considering the net gain or loss on the forward contract plus or minus the
forward contract premium or discount.)
7-4
Answers to Questions
1. Under the two-transaction perspective, an export sale (import purchase) and the subsequent
collection (payment) of cash are treated as two separate transactions to be accounted for
separately. The idea is that management has made two decisions: (1) to make the export
sale (import purchase), and (2) to extend credit in foreign currency to the foreign customer
(obtain credit from the foreign supplier). The income effect from each of these decisions
should be reported separately.
2. Foreign currency receivables resulting from export sales are revalued at the end of
accounting periods using the current spot rate. An increase in the value of a receivable will
be offset by reporting a foreign exchange gain in net income, and a decrease will be offset
by a foreign exchange loss. Foreign exchange gains and losses are accrued even though
they have not yet been realized.
3. Foreign exchange gains and losses are created by two factors: having foreign currency
exposures (foreign currency receivables and payables) and changes in exchange rates.
Appreciation of the foreign currency will generate foreign exchange gains on receivables and
foreign exchange losses on payables. Depreciation of the foreign currency will generate
foreign exchange losses on receivables and foreign exchange gains on payables.
4. The accounting for a foreign currency borrowing involves keeping track of two foreign
currency payables—the note payable and interest payable. As both the face value of the
borrowing and accrued interest represent foreign currency liabilities, both are exposed to
foreign exchange risk and can give rise to foreign currency gains and losses.
5. Hedging is the process of eliminating exposure to foreign exchange risk so as to avoid

potential losses from fluctuations in exchange rates. In addition to avoiding possible losses,
companies hedge foreign currency transactions, foreign currency firm commitments, and
forecasted foreign currency transactions to introduce an element of certainty into the future
cash flows resulting from foreign currency activities. Hedging involves establishing a price
today at which foreign currency can be sold or purchased at a future date.
6. A party to a foreign currency forward contract is obligated to deliver one currency in exchange
for another at a specified future date, whereas the owner of a foreign currency option can
choose whether to exercise the option and exchange one currency for another or not.
7. Hedges of foreign currency denominated assets and liabilities are not entered into until a
foreign currency transaction (import purchase or export sale) has taken place. Hedges of
firm commitments are made when a purchase order is placed or a sales order is received,
before a transaction has taken place. Hedges of forecasted transactions are made at the
time a future foreign currency purchase or sale can be anticipated, even before an order has
been placed or received.
8. Foreign currency options have an advantage over forward contracts in that the holder of the
option can choose not to exercise if the future spot rate turns out to be more advantageous.
Forward contracts, on the other hand, can lock a company into an unnecessary loss (or a
reduced gain). The disadvantage associated with foreign currency options is that a premium
must be paid up front even though the option might never be exercised.
7-5
9. An enterprise is required to recognize all derivative financial instruments as assets or

liabilities on the balance sheet and measure them at fair value.
10. The fair value of a foreign currency forward contract is determined by reference to changes
in the forward rate over the life of the contract, discounted to the present value. Three pieces
of information are needed to determine the fair value of a forward contract at any point in
time during its life: (a) the contracted forward rate when the forward contract is entered into,
(b) the current forward rate for a contract that matures on the same date as the forward
contract entered into, and (c) a discount rate; typically, the company’s incremental borrowing
rate.
The manner in which the fair value of a foreign currency option is determined depends on
whether the option is traded on an exchange or has been acquired in the over the counter
market. The fair value of an exchange-traded foreign currency option is its current market
price quoted on the exchange. For over the counter options, fair value can be determined
by obtaining a price quote from an option dealer (such as a bank). If dealer price quotes are
unavailable, the company can estimate the value of an option using the modified Black-
Scholes option pricing model. Regardless of who does the calculation, principles similar to
those in the Black-Scholes pricing model will be used in determining the value of the option.
11. Hedge accounting is defined as recognition of gains and losses on the hedging instrument in
the same period as the recognition of gains and losses on the underlying hedged asset or
liability (or firm commitment).
12. For hedge accounting to apply, the forecasted transaction must be probable (likely to occur),
the hedge must be highly effective in offsetting fluctuations in the cash flow associated with
the foreign currency risk, and the hedging relationship must be properly documented.
13. In both cases, (1) sales revenue (or the cost of the item purchased) is determined using the
spot rate at the date of sale (or purchase), and (2) the hedged asset or liability is adjusted to
fair value based on changes in the spot exchange rate with a foreign exchange gain or loss
recognized in net income.
For a cash flow hedge, the derivative hedging instrument is adjusted to fair value (resulting
in an asset or liability reported on the balance sheet), with the counterpart recognized as a
change in Accumulated Other Comprehensive Income (AOCI). An amount equal to the
foreign exchange gain or loss on the hedged asset or liability is then transferred from AOCI
to net income; the net effect is to offset any gain or loss on the hedged asset or liability. An
additional amount is removed from AOCI and recognized in net income to reflect (a) the
current period’s amortization of the original discount or premium on the forward contract (if a
forward contract is the hedging instrument) or (b) the change in the time value of the option
(if an option is the hedging instrument).
For a fair value hedge, the derivative hedging instrument is adjusted to fair value (resulting
in an asset or liability reported on the balance sheet), with the counterpart recognized as a
gain or loss in net income. The discount or premium on a forward contract is not allocated
to net income. The change in the time value of an option is not recognized in net income.
14. For a fair value hedge of a foreign currency asset or liability (1) sales revenue (cost of
purchases) is recognized at the spot rate at the date of sale (purchase) and (2) the hedged
7-6
asset or liability is adjusted to fair value based on changes in the spot exchange rate with a
foreign exchange gain or loss recognized in net income. The forward contract is adjusted to
fair value based on changes in the forward rate (resulting in an asset or liability reported on
the balance sheet), with the counterpart recognized as a gain or loss in net income. The
foreign exchange gain (loss) and the forward contract loss (gain) are likely to be of different
amounts resulting in a net gain or loss reported in net income.
For a fair value hedge of a firm commitment, there is no hedged asset or liability to account
for. The forward contract is adjusted to fair value based on changes in the forward rate
(resulting in an asset or liability reported on the balance sheet), with a gain or loss recognized
in net income. The firm commitment is also adjusted to fair value based on changes in the
forward rate (resulting in a liability or asset reported on the balance sheet), and a gain or loss
on firm commitment is recognized in net income. The firm commitment gain (loss) offsets
the forward contract loss (gain) resulting in zero impact on net income. Sales revenue (cost
of purchases) is recognized at the spot rate at the date of sale (purchase). The firm
commitment account is closed as an adjustment to net income in the period in which the
hedged item affects net income.
15. For a cash flow hedge of a foreign currency asset or liability (1) sales revenue (cost of
purchases) is recognized at the spot rate at the date of sale (purchase) and (2) the hedged
asset or liability is adjusted to fair value based on changes in the spot exchange rate with a
foreign exchange gain or loss recognized in net income. The forward contract is adjusted to
fair value (resulting in an asset or liability reported on the balance sheet), with the counterpart
recognized as a change in Accumulated Other Comprehensive Income (AOCI). An amount
equal to the foreign exchange gain or loss on the hedged asset or liability is then transferred
from AOCI to net income; the net effect is to offset any gain or loss on the hedged asset or
liability. An additional amount is removed from AOCI and recognized in net income to reflect
the current period’s allocation of the discount or premium on the forward contract.
For a hedge of a forecasted transaction, the forward contract is adjusted to fair value
(resulting in an asset or liability reported on the balance sheet), with the counterpart
recognized as a change in Accumulated Other Comprehensive Income (AOCI). Because
there is no foreign currency asset or liability, there is no transfer from AOCI to net income to
offset any gain or loss on the asset or liability. The current period’s allocation of the forward
contract discount or premium is recognized in net income with the counterpart reflected in
AOCI. Sales revenue (cost of purchases) is recognized at the spot rate at the date of sale
(purchase). The amount accumulated in AOCI related to the hedge is closed as an
adjustment to net income in the period in which the forecasted transaction was anticipated
to occur.
16. In accounting for a fair value hedge, the change in the fair value of the foreign currency option
is reported as a gain or loss in net income. In accounting for a cash flow hedge, the change
in the entire fair value of the option is first reported in other comprehensive income, and then
the change in the time value of the option is reported as an expense in net income.
7-7
Answers to Problems
1. C (Foreign exchange gain/loss on foreign currency transaction)
An import purchase causes a foreign currency payable to be carried on the

books. If the foreign currency depreciates, the dollar value of the foreign
currency payable decreases, yielding a foreign exchange gain.
2. D (Method of accounting for foreign currency transactions)
Current accounting standards require a two-transaction perspective,

accrual approach.
3. A (Foreign exchange gain/loss on foreign currency transaction)
Foreign exchange gains related to foreign currency import purchases are

treated as a component of income before income taxes. If there is no
foreign exchange gain in operating income, then the purchase must have
been denominated in U.S. dollars or there was no change in the value of the
foreign currency from October 1 to December 1, 2017.
4. B (Calculate foreign exchange gain/loss on foreign currency transaction)
The dollar value of the LCU receivable has increased from $110,000 at
December 31, 2017 to $120,000 at February 15, 2018. This increase of
$10,000 should be reported as a foreign exchange gain in 2018.
5. C (Calculate foreign exchange gain/loss on foreign currency borrowing)
The decrease in the dollar value of the euro note payable represents a
foreign exchange gain. In this case a $5,000 gain would have been accrued
in 2017 and a $10,000 gain will be reported in 2018.
6. B (Foreign exchange gain/loss on foreign currency transaction)
A foreign currency payable will generate a foreign exchange loss when the
foreign currency increases in dollar value. A foreign currency receivable
will generate a foreign exchange loss when the foreign currency decreases
in dollar value. Hence, the correct combination is yuan (increase) and peso
(decrease).
7-8
7. B (Calculate foreign exchange gain/loss)
The merchandise purchase results in a foreign exchange gain of $10,000,

the difference between the U.S. dollar equivalent at the date of purchase and
at the date of settlement.
The increase in the dollar equivalent of the note’s principal results in a
foreign exchange loss of $20,000.
The net foreign exchange loss is $10,000 ($10,000 gain - $20,000 loss).
8. A (Forward contract cash flow hedge of foreign currency denominated

asset/liability)
The Thai baht is selling at a discount (spot rate exceeds forward rate). The
exporter will receive fewer dollars as a result of selling the baht forward than
if the baht had been received and converted into dollars on June 1. Thus,
the discount results in an expense for the exporter.
9. C (Forward contract fair value hedge of foreign currency firm commitment)
The parts inventory will be recognized at the spot rate at the date of receipt
(FC100,000 x $.22 = $22,000).
10. A (Determine the fair value of a forward contract)
The forward contract must be reported on the December 31, 2017 balance
sheet as an asset. Ringling has locked-in to purchase pesos at $0.047 per
peso. If it had waited until December 31 to enter into the forward contract it
would have locked-in to purchase pesos at $0.049 per peso. Therefore, the
forward contract has a positive fair value on December 31, 2017, and is an
asset. The forward contract must be reported at its fair value discounted for
two months at 12%, which is $1,960.60 [($.047 – $.049) x 1,000,000 x .9803].
11. C (Calculate foreign exchange gain/loss on foreign currency transaction)
The 10 million won receivable has changed in dollar value from $35,000 at
12/1/17 to $33,000 at 12/31/17. The won receivable will be written down by
$2,000 and a foreign exchange loss will be reported in 2017 income.
12. B (Forward contract fair value hedge of foreign currency denominated

asset/liability)
The nominal value of the forward contract on December 31, 2017 is a

positive $2,000, the difference between the amount to be received from the
forward contract actually entered into, $34,000 ($.0034 x 10 million), and the
amount that could be received by entering into a forward contract on
December 31, 2017 that matures on March 31, 2018, $32,000 ($.0032 x 10
7-9
12. (continued)
Million). The fair value of the forward contract is the present value of $2,000
discounted for three months, which is $1,941.20 (2,000 x .9706). On
December 31, 2017, MNC Corp. will recognize a $1,941.20 gain on the
forward contract and a foreign exchange loss of $2,000 on the won
receivable. The net impact on 2017 income is a decrease of $58.80.
13. A (Forward contract cash flow hedge of forecasted foreign currency

transaction)
The krona is selling at a premium in the forward market, causing Pimlico to

pay more dollars to acquire kroner than if the kroner were purchased at the
spot rate on March 1. Therefore, the premium results in an expense of
$10,000 [($.12 – $.10) x 500,000].
The Adjustment to Net Income is the amount accumulated in Accumulated
Other Comprehensive Income (AOCI) as a result of recognizing the
Premium Expense and the fair value of the forward contract. The journal
entries would be as follows:
3/1 no journal entries
6/1 Premium Expense 10,000

AOCI 10,000
AOCI 2,500
Forward Contract 2,500
Foreign Currency 57,500

Cash 60,000
AOCI 7,500
Adjustment to Net Income 7,500
14. B (Option cash flow hedge of forecasted foreign currency transaction)
This is a cash flow hedge of a forecasted transaction. The original cost of

the option of $600 is recognized as an Option Expense over the life of the
option.
7-10
15-17. (Option fair value hedge of a foreign currency firm commitment)
15. B
16. D
The easiest way to solve problems 15 and 16 is to prepare journal entries for
the option fair value hedge and the firm commitment. The journal entries are
as follows:
9/1/17
Foreign Currency Option 2,000.00
Cash 2,000.00
12/31/17
Foreign Currency Option 300.00
Gain on Foreign Currency Option 300.00
Loss on Firm Commitment 980.30
Firm Commitment 980.30
[($.79 – $.80) x 100,000 = $1,000 x .9803 = $980.30]
Net impact on 2017 net income:
Gain on Foreign Currency Option $300.00
Loss on Firm Commitment (980.30)
$(680.30)
3/1/18
Foreign Currency Option 700.00
Gain on Foreign Currency Option 700.00
Loss on Firm Commitment 2,019.70

Firm Commitment 2,019.70
[($.77 – $.80) x 100,000 = $3,000 – $980.30 = $2,019.70]
Foreign Currency (C$) 77,000.00

Sales 77,000.00
Cash 80,000.00
Foreign Currency (C$) 77,000.00
Foreign Currency Option 3,000.00
Firm Commitment 3,000.00

Adjustment to Net Income 3,000.00
7-11
15-17. (continued)

Gain on Foreign Currency Option $ 700.00
Loss on Firm Commitment (2,019.70)
Sales 77,000.00
Adjustment to Net Income 3,000.00
$78,680.30
17. B Net cash inflow with option ($80,000 – $2,000) $78,000

Cash inflow without option (at spot rate of $.77) 77,000
Net increase in cash inflow $ 1,000
18-20. (Forward contract fair value hedge of a foreign currency firm commitment)
the forward contract fair value hedge of a firm commitment. The journal
entries are as follows:
6/1 no journal entries
6/30 Forward Contract 2,400

Gain on Forward Contract 2,400
($2,400 – $0)
Loss on Firm Commitment 2,400

Firm Commitment 2,400
Net impact on second quarter net income is $0.
7-12
18-20. (continued)
7/31 Loss on Forward Contract 400

Forward Contract 400
[Fair value of Forward Contract is
(($.120 – $.118) x 1,000,000) = $2,000;
$2,000 – $2,400 = $400]
Firm Commitment 400
Gain on Firm Commitment 400
Foreign Currency (pesos) 118,000
Sales [1,000,000 pesos x $.118] 118,000
Cash [1,000,000 x $.120] 120,000
Foreign Currency (pesos) 118,000
Firm Commitment 2,000
The impact on third quarter net income is: Sales $118,000 – Loss on Forward
Contract $400 + Gain on Firm Commitment $400 + Adjustment to Net Income
$2,000 = $120,000.
18. A
19. D
20. D Cash inflow with forward contract [1,000,000 pesos x $.12] $120,000
Cash inflow without forward contract [1,000,000 pesos x $.118] 118,000
Net increase in cash flow from forward contract $ 2,000
7-13
21-22. (Option cash flow hedge of a forecasted foreign currency transaction)
the option cash flow hedge of a forecasted transaction. The journal entries
are as follows:
11/1/17
Foreign Currency Option 1,500
Cash 1,500
12/31/17
Option Expense 400
Foreign Currency Option 400
(The option has no intrinsic value at 12/31/17 so the entire change in fair
value is due to a change in time value; $1,500 – $1,100 = $400 decrease in
time value. The decrease in time value of the option is recognized as an
expense in net income.)
Option Expense decreases net income by $400.
2/1/18
Option Expense 1,100
Foreign Currency Option 900
Accumulated Other Comprehensive Income (AOCI) 2,000
(Record expense for the decrease in time value of the
option; $1,100 – $0 = $1,100; and write-up option to fair
value ($.40 – $.41) x 200,000 = $2,000 – $1,100 = $900.)
Foreign Currency (BRL) [200,000 x $.41] 82,000

Cash [200,000 x $.40] 80,000
Foreign Currency Option 2,000
Parts Inventory 82,000

Foreign Currency (BRL) 82,000
Accumulated Other Comprehensive Income (AOCI) 2,000

7-14
21-22. (continued)

Option Expense $ (1,100)
Cost-of-Goods-Sold (82,000)
Decrease in Net Income $ (81,100)
21. B
22. C
23. (10 minutes) (Foreign currency payable – import purchase)
a. The decrease in the dollar value of the markka payable from November 1
(100,000 x .754 = $75,400) to December 31 (100,000 x .742 = $74,200) is
recorded as a $1,200 foreign exchange gain in 2017.
b. The increase in the dollar value of the markka payable from December 31
($74,200) to January 15 (100,000 x .747 = $74,700) is recorded as a $500
foreign exchange loss in 2018.
24. (10 minutes) (Foreign currency receivable – export sale)
a. The ostra receivable decreases in dollar value from (50,000 x $1.05) $52,500
at December 20 to $51,000 (50,000 x $1.02) at December 31, resulting in a
foreign exchange loss of $1,500 in 2017.
b. The further decrease in dollar value of the ostra receivable from $51,000 at
December 31 to $49,000 (50,000 x $.98) at January 10 results in an additional
$2,000 foreign exchange loss in 2018.
25. (10 minutes) (Foreign currency receivable – export sale)
9/15 Accounts Receivable (crowns) [100,000 x $.60] 60,000

Sales 60,000
9/30 Accounts Receivable (crowns) 6,000

Foreign Exchange Gain 6,000
[100,000 x ($.66 – $.60)]
10/15 Foreign Exchange Loss 4,000

Accounts Receivable (crowns) 4,000
[100,000 x ($.62 – $.66)]
Cash 62,000
Accounts Receivable (crowns) 62,000
7-15
26. (10 minutes) (Foreign currency payable – import purchase)
12/15/17 Inventory 14,000

Accounts Payable (schillings) [50,000 x $.28] 14,000
12/31/17 Foreign Exchange Loss 1,000

Accounts Payable (schillings) [50,000 x ($.30 – $.28)] 1,000

Accounts Payable (schillings) [50,000 x ($.33 – $.30)] 1,500
Accounts Payable (schillings) 16,500

Cash 16,500
27. (15 minutes) (Determine U.S. dollar balance for foreign currency transactions)
Inventory and Cost of Goods Sold are reported at the spot rate at the date the
inventory was purchased. Sales are reported at the spot rate at the date of sale.
Accounts Receivable and Accounts Payable are reported at the spot rate at the
balance sheet date. Cash is reported at the spot rate when collected and the
spot rate when paid.
a. Inventory [100,000 pesos x $.10 x 40% unsold] ...................................... $4,000

b. COGS [100,000 pesos x $.10 x 60% sold] ................................................ $6,000
c. Sales [80,000 pesos x $.12]....................................................................... $9,600
d. Accounts Receivable [80,000 – 70,000 = 10,000 pesos x $.15] .............. $1,500
e. Accounts Payable [100,000 – 60,000 = 40,000 pesos x $.15] ................. $6,000
f. Cash [(70,000 x $.13) – (60,000 x $.14)] ....................................................... $700
7-16
28. (25 minutes) (Prepare journal entries for a foreign currency borrowing)
4/1/17 Cash 550,000

Note Payable (euro) [500,000 x $1.10] 550,000
10/1/17 Interest Expense [500,000 x 5% x 6/12 x $1.20] 15,000

Cash 15,000

Interest Payable (euro) 7,750
Foreign Exchange Loss 70,000

Note Payable (euro) [500,000 x ($1.24 - $1.10)] 70,000

Interest Payable (euro) 7,750
Foreign Exchange Loss [500,000 x 5% x 3/12 x
($1.28 – $1.24)] 250
Cash [500,000 x 5% x 6/12 x $1.28] 16,000
Note Payable (euro) 620,000

Foreign Exchange Loss [500,000 x ($1.28 - $1.24)] 20,000
Cash [500,000 x $1.28] 640,000
29. (20 minutes) (Determine income effect of foreign currency payable – import
purchase)
a. Benjamin, Inc. has a liability of AL 160,000. On the date that this liability
was created (December 1, 2017), the liability had a dollar value of $70,400
(AL 160,000 x $.44). On December 31, 2017, the dollar value has risen to
$76,800 (AL 160,000 x $.48). The increase in the dollar value of the liability
creates a foreign exchange loss of $6,400 ($76,800 – $70,400) in 2017.
By March 1, 2018, when the liability is paid, the dollar value has dropped
to $72,000 (AL 160,000 x $.45) creating a foreign exchange gain of $4,800
($72,000 – $76,800) to be reported in 2018.
b. Benjamin, Inc. has a liability of AL 160,000. On the date that this liability
was created (September 1, 2017), the liability had a dollar value of $73,600
(AL 160,000 x $.46). On December 1, 2017, when the liability is paid, the
dollar value has decreased to $70,400 (AL 160,000 x $.44). The drop in the
dollar value of the liability creates a foreign exchange gain of $3,200
($70,400 – $73,600) in 2017.
7-17
29. (continued)
c. Benjamin, Inc. has a liability of AL 160,000. On the date that this liability
was created (September 1, 2017), the liability had a dollar value of $73,600
(AL 160,000 x $.46). On December 31, 2017, the dollar value has risen to
$76,800 (AL 160,000 x $.48). The increase in the dollar value of the liability
creates a foreign exchange loss of $3,200 ($76,800 – $73,600) in 2017.
By March 1, 2018, when the liability is paid, the dollar value has dropped
to $72,000 (AL 160,000 x $.45) creating a foreign exchange gain of $4,800
($72,000 – $76,800) to be reported in 2018.
30. (30 minutes) (Foreign currency borrowing)
a. 9/30/17 Cash 100,000

Note payable (dudek) [1,000,000 x $.10] 100,000
(To record the note and conversion of 1 million
dudeks into $ at the spot rate.)
12/31/17 Interest Expense 525

Interest Payable (dudek) 525
[1,000,000 x 2% x 3/12 = 5,000 dudeks x
$.105 spot rate]
(To accrue interest for the period 9/30 – 12/31/17.)

Note Payable (dudek) [1 mn x ($.105 – $.10)] 5,000
(To revalue the note payable at the spot rate of
$.105 and record a foreign exchange loss.)
9/30/18 Interest Expense [15,000 dudeks x $.12] 1,800

Foreign Exchange Loss [5,000 dudeks x ($.12 – $.105)] 75
Cash [20,000 dudeks x $.12] 2,400
(To record the first annual interest payment,
record interest expense for the period 1/1 – 9/30/18,
and record a foreign exchange loss on the
interest payable accrued at 12/31/17.)
12/31/18 Interest Expense 625

Interest Payable (dudek) [5,000 dudeks x $.125] 625
(To accrue interest for the period 9/30 – 12/31/18.)
7-18
30. (continued)

Note Payable (dudek) [1 mn x ($.125 – $.105)] 20,000
(To revalue the note payable at the spot rate of
$.125 and record a foreign exchange loss.)
9/30/19 Interest Expense [15,000 dudeks x $.15] 2,250

Foreign Exchange Loss [5,000 dudeks x
($.15 – $.125)] 125
Cash [20,000 dudeks x $.15] 3,000
(To record the second annual interest payment,
record interest expense for the period 1/1 – 9/30/19,
and record a foreign exchange loss on the interest
payable accrued at 12/31/18.)
Note Payable (dudek) 125,000

Cash [1 mn dudeks x $.15] 150,000
(To record payment of the 1 million dudek note.)
b. The effective interest rate on the loan can be determined by summing the total
interest expense and foreign exchange losses related to the loan and
comparing this with the amount borrowed:
2017
Interest expense $525
Foreign exchange loss 5,000
Total $5,525 / $100,000 = 5.525% for 3 months
5.525% x 12/3 = 22.1% for 12 months
2018
Interest expense $2,425
Foreign exchange losses 20,075
Total $22,500 / $100,000 = 22.5% for 12 months
2019
Interest expense $2,250
Foreign exchange losses 25,125
Total $27,375 / $100,000 = 27.38% for 9 months
27.38% x 12/9 = 36.5% for 12 months
Because of appreciation in the value of the dudek, the effective annual interest
cost ranges from 22.1% – 36.5%.
7-19
30. (continued)
The net cash flows from this borrowing are:
Cash outflows:
Interest ($2,400 + $3,000) $ 5,400
Principal 150,000
$155,400
Cash inflow:
Borrowing (100,000)
Net cash outflow $ 55,400
Ignoring compounding, this results in an average effective interest rate of

approximately 27.7% per year [($55,400 / $100,000) = 55.4% over two years;
55.4% / 2 years = 27.7% per year].
7-20
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Title: Hävittäjä
Author: Konrad Lehtimäki
Release date: August 24, 2023 [eBook #71474]
Language: Finnish
Original publication: Kuopio: Savon Kansan Kirjapaino, 1921
Credits: Tapio Riikonen
*** START OF THE PROJECT GUTENBERG EBOOK HÄVITTÄJÄ

***
HÅVITTÅJÄ
Kirj.
Konrad Lehtimäki
Kuopiossa, Savon Kansan Kirjapaino Oy, 1921.
SISÄLTÖ:
Hullun päiväkirja
Turvapaikka
Vvallankumouksellinen
Hävittäjä
HULLUN PÄIVÄKIRJA
Vanha harmaapartainen mies istui yksin hienossa ruokasalissa, ja

silmäili väsyneesti aamulehteään. Vanha palvelija kaatoi hänelle
kahvia, kumarsi äänettömästi ja siirtyi seisomaan hänen tuolinsa
taakse.
Hän pani sokeripalan kuppiin, hämmenteli sitä hitaasti ja sitten

hörppi hitaasti puolisen kuppia, jättäen lopun siihen.
Vanha palvelija rykäsi ja huomautti arasti ja huolestuneesti:
— Herra tohtori… suvaitkaa ottaa hiukan leipää… se on tuoreita…
— Onko posti tullut?
— Ei vielä, herra tohtori, — vastasi palvelija alakuloisesti.
Vanha mies nousi ja asteli heikoin askelin toiseen huoneeseen.

Istui pehmeään nojatuoliin ja sytytti sikaarin.
Hetken kuluttua hän nousi uudestaan, asteli ikkunan ääreen ja

hänen ryppyisissä kasvoissaan kuvastui tuskallinen, levoton odotus.
Hän hätkähti kuullessaan jostain kaukaa ovikellon äänen ja heti
sen jälkeen toi palvelija tarjottimella kirjeen ja paketin…
Hän sieppasi kirjeen, repi auki kuoren — vieras käsiala: »Arvoisa

herra». Hän heitti pois kirjeen.
Pienestä paketista tuli ensimmäisenä esiin silkkipaperikäärö; hän

kääri sen auki vapisevin sormin — ja sodassa olevan poikansa kello
tikitti hänen kourassaan… Toisesta kääröstä ilmestyi valokuva, jossa
hän oli yhdessä morsiamensa kanssa… sitten sormus.
Hän hätkähtää; totuus työntyy tylsänä, jääkylmänä nuolena

sydämeen…
Sikaari unohtui sammuneena hänen käteensä: hän muisti

samanlaisen syyspäivän kaksi vuotta sitten, jolloin hänen nuorin
poikansa oli tullut sisään ja hiukan arasti kysynyt, lähteekö sotaan
vapaaehtoisena, vai ei. Kun kaksi veljeä oli jo kaatunut, niin isä jäisi
aivan yksin, jos… Sentähden hänestä on väärin jättää isä yksin ja
saa isä ratkaista…
Vanha mies muistaa vieläkin äänensä valheellisen juhlallisuuden,

vastatessaan hitaasti:
— Mene poikani! Minun tähteni ei isänmaa saa kärsiä. Minulla ei

saa olla mitään, joka olisi isänmaata kalliimpi!
Poika punastui, katsahti häntä omituisesti ja lausui lyhyesti: Hyvä.

Kääntyi ja poistui hitain askelin.
Oo — hän olisi tahtonut silloin peruuttaa sanansa, pyytää, rukoilla,

ettei poika lähtisi — eikä kuitenkaan tehnyt sitä.
Ja seuraavana päivänä poika lähti.
Katumus se ei ole mitään sen kauhean tunteen rinnalla, jota hän

on siitä lähtien povessaan kantanut kuni myrkyllistä käärmettä, —
käärmettä, joka aina vähän ajan kuluttua puree paljasta ihoa eikä
sen myrkystä kuole, kituu vain…
Vanha mies oli kuin jähmettynyt, tunsi vain, miten kylmä hiki
pusertui suurina karpaloina hänen otsalleen ja päässä pyöri kaikki
kohisevana kaaoksena. Hämärästi käsitti hän jotain hirmuista
tapahtuneen — mutta mitä?
Kuin unessa katseli hän, miten ryppyiset, vapisevat sormet

pitelivät sormusta, jossa oli punainen kivi — ja alkoi taas muistaa…
Tuo kivi muistutti suurta veripisaraa — hänen vertansa. Ja hänelle
tuli tuskallinen mielikuva: se värisee… Niin, se eli vielä, se itki, valitti,
se toi hänen viimeisen tervehdyksensä… Se on hänen nuorta,
punaista vertansa…
— Miksi, miksi minä silloin… kaksi vuotta sitten? — kuiskasi hän

äänettömästi ja tarttui tukkaansa. Sitten kuuli hän raskaan,
haavoitetun voihketta muistuttavan huokauksen — ja huomasikin
huokaisseensa itse; kaikki on niin epäselvää ja ahdistavaa kuin
tuskallisessa painajaisunessa.
— Mutta se suuri ja kiduttava ei ole unta — nuo esineet ovat

todellisia, eivätkä katoa… Hän rukoilee, että se olisi unta, mutta ei,
ei… Hän kuulee kadulta huutoja, vaunujen jyrinää… Joku huutelee
nauraen toiselle, kuuluu joku kirous… heleätä naurua… Ei… Onko
se siis totta? Onko hän…?
Ja aivankuin vastaukseksi itselleen kuiskaavat hänen vapisevat
huulensa:
— Jumalani… jumalani ainoa poikani on kuollut… kuollut.
Mutta silloin on hän kuulevinaan jonkun vieraan, ilkkuvan äänen

kähisevän korvassaan:
— Entäs kaksi vuotta sitten…?
Vanha mies katsahtaa ympärilleen kuin mieletön. Silloin hän

huomaa käärössä poikansa muistikirjan — ja tarttuu siihen niinkuin
hukkuva hädässään… Hänen poikansa oli joka päivä kirjoittanut
tärkeimmät kokemuksensa ja tunnelmansa muistiin ja lähettänyt
hänelle joka sunnuntaiksi — jotta hän sai päivä päivältä seurata
poikansa elämää. Puolet kirjan lehdistä oli jo irroitettu: ne olivat täällä
hänen pöytälaatikossaan ja jatko oli nyt hänen vapisevissa
käsissään, kirjoitettuna hänen kauniilla käsialallaan… Vanha isä
tunsi aivankuin epämääräistä toivoa alkaessaan lukea:
Maanantaina 10 p:nä heinäk.
Rakas isä:
Olen vieläkin kenraalin kirjurin apulaisena ja olen niin iloinen, ettei

minun tarvitse mennä juoksuhautoihin — tänään minä vasta
ensikerran sen oikein tunsin.
Taistelu on jatkunut täällä jo kolme päivää yhtämittaa. Äsken kun

minun piti viedä eräs paperi kenraalin allekirjoitettavaksi ja olin
aukaisemaisillani sen maalaistuvan oven, jossa kenraali asuu, kuulin
kummallisen voihkauksen. Pysähdyin jännittyneenä ja kuulin hänen
vieraan, käheän kuiskauksensa:
— Poikani… poikani… Jumala, miksi sen teit?
Kuului taas tuo voihkaisu ja se sattui sydämeeni kuni kylmä

pistimen kärki: kenraalin molemmat pojat olivat kaatuneet tänä
aamuna — ja minä muistin sinut, isä… Sentähden tuntuu niin
hyvältä, että olen täällä… Miten sinä kärsisitkään, jos jäisin sinne
silvottuna, muodottomana… Sinähän olet muutenkin niin yksin,
rakas isä… Luonnollisesti en itsekään tahtoisi kuolla, olenhan nuori,
elämäni kaikki vielä edessä… Ja kun hän vielä — niin, kyllähän te
ymmärrätte, isä…
Tiistaina 11 p:nä.
Taistelu on päättynyt. Hyökkäys lopullisesti torjuttu. Suuri

vihollisjoukko tuli eristetyksi pääjoukosta ja sen täytyi antautua. Ja
minä olin äsken asemalla kun viimeisiä heistä sullottiin
rautatievaunuihin.
Pölyisellä ratapihalla oli kauhea helle. Pitkän tavaravaunurivin

ympärillä pyörivät ja häärivät hikiset, likaiset olennot
kuumeentapaiselia kiireellä ja savuisessa ilmassa risteili käheitä
käskyjä, haukkumasanoja, kirouksia…
Kenraali karautti roturatsuaan sinne tänne, jotta vaahto putoili sen

mustilta kyljiltä… Sitten seisautti sihteerinsä kohdalle ja kysyi
kolealla, aivankuin pidätetyllä voitonriemulla:
— Ovatko kaikki vaunuissa, herra kapteeni?

Kapteeni, jonka apulainen olen, läheni kiireesti ja vastasi kunniaa
tehden:
— Ovat, herra kenraali!
— Montako?
Kapteeni katsahti muistikirjaansa ja vastasi taas kunnioittavasti:
— Kaikkiaan 867, teidän ylhäisyytenne! Niistä on 105 vaarallisesti

ja 264 lievemmin haavoittunutta; loput terveitä.
— Hyvä, — virkkoi kenraali hitaasti ja jotain epämääräistä,

pahanenteistä välähti taas hänen katseessaan. — Vihollisten
lentokoneet ovat särkeneet sillan — vankijunaa ei siis toistaiseksi
voida lähettää. Hankkikaa lujat lukot ja sulkekaa heti kaikki ovet.
Kapteeni katsahti neuvottomasti ympärilleen ja sitten sanoi arasti,

miltei kuiskaten:
— Teidän ylhäisyytenne… vaikeasti haavoittuneet…
Hän vaikeni, sillä kenraalin kasvot muuttuivat peloittavan

näköisiksi. Tuijottaen kapteenia silmiin, sinkautti hän pidätetystä
raivosta sähisevällä äänellä:
— Lukot oviin!
Kapteeni kalpeni ja hänen katseensa vaipui; kunniaa tehden

sopersi hän vapisevin äänin:
— Ymmärrän, herra kenraali…

Minä kuulin ja näin kaikki, sillä seisoin aivan vieressä ja minua
pelottaa — mieleeni tahtoo väkisin tunkeutua kamala aavistus…
Kenraalin pojat kaatuivat eilen… Ei — se ei ole mahdollista — se on
mahdotonta…
Keskiviikkona.
Istun vaunun alla ja kirjoitan tätä muistikirjaani. Auringon

paahteessa on mahdoton olla, helle on vielä hirveämpi kuin eilen. Ei
ainoatakaan tuulenhenkäystä, ei pilvenhattaraa taivaalla, hehkuva
ilma vain värisee, aivankuin avaruus olisi täynnä tulisena kiehuvaa
lasimassaa. Ratakiskot ovat tulikuumat. Hiekka polttaa jalkoja
kenkien lävitse. Kaikki näyttävät loppuun nääntyneiltä ja monet
tuijottavat tylsin verestävin silmin eteensä — aivankuin olisivat olleet
pari viikkoa yhtämittaa humalassa.
Eikä ole vettä.
Me olemme sentään ulkoilmassa — mutta vangit…? Ovia ei ole

kertaakaan aukaistu ja siellä he ovat kaikki, haavoittuneet, kuolevat,
ja… Ei, en uskalla ajatella… Sieltä kuuluu niin kamala meteli:
jyskettä, valituksia, rukouksia, korinaa… Ei, ei…
Ja kummallakin puolella on kasakkaosasto kuularuiskujen

kanssa… Ei voi mitään…
Torstaina.
Minä en tällä hetkellä käsitä paljo muuta kuin sen, että suuta
kirvelee ja kurkkua polttaa, ikäänkuin sieltä nousisi hiljainen tuuli.
Pitkällisen kuivuuden vaikutuksesta ei koko paikkakunnalla ole vettä;
eräässä suossa vielä löytyy sakeata, hyönteisistä kihisevää moskaa,
josta selittämällä on saatu vähän harmahtavaa nestettä — mutta
eihän siitä joukot saa. Ja helle tuntuu kiihtymistään kiihtyvän — nyt
on kovin vaikea hengittää. Ja kaiken lisäksi on vankivaunuista
alkanut kuulua sellaista, jota ihmiset eivät voi kauan kestää. Tänään
jo ryntäsi parikymmentä sotilasta aivankuin mielettöminä vaunuja
kohden; mutta kuularuiskut alkoivat heti säristä — ja heidät
kannettiin kaikki paareilla pois: hautaan…
Ooh — äsken menin vaunujen toiselle puolelle tuulen alle — ja

olin vähällä tukehtua, pyörtyä; sieltä tuli niin pöyristyttävä löyhkä.
Siellä tukehuttavassa kuumuudessa he kaikki viruvat
yhteensullottuna: kuolleet, haavoittuneet, kuolevat ja mielipuolet…
Oh… Tuo korina tunkeutui suoraan sydämeeni hyytävän kylmänä,
värisyttävänä.
Myöhemmin.
Äsken tapahtui jotain odottamatonta ja kauhistuttavaa: vaunuista

kuului naurua — ja se on lisääntynyt yhtämittaa. Tuo nauru on tuhat
kertaa kauheampaa kuin vihlovinkaan voihke ja tuskanhuudot — ja
se yltyy, yhä, yltyy…
Olen ollut täällä ratapihalla jo pitkän ajan mutta en voi poistua.

Minun täytyy kuunnella. Vaunuista kuuluu yhtenä kammottavana
kuorona matalaa, käheätä hörkötystä ja hohotusta, nääntynyttä
uikutusta ja pitkäveteistä, kimeätä ulvontaa ja vihlovia kiljahduksia.
— Ne tunkeutuvat ruumiin lävitse aivankuin jääkylmät, pitkät
pistimet…
Herra jumalat Mitä, mitä tämä on…? Minä tunnen kauhean halun
yhtyä tuohon nauruun… Herra auta, auta minua!
Perjantaina.
Rakas isä!
Suo minulle anteeksi, minä olen muutaman kerran nauranut.

Toverit pelästyivät ja minä pelkään, että saan siitä jonkun
rangaistuksen — en voinut sille mitään! Nyt ovat toverinikin alkaneet
nauraa; mutta minä en enää — en naura enää!
Lauantaina.
Isä!
Minun täytyy kirjoittaa muutama rivi ja lähettää sinulle, vaikka

minulla on kuumeentapainen kiire. Sillä minulle on tapahtunut
yliluonnollinen onni — minulle on annettu elämän avain.
Minä taistelin kauan vastaan, vaikka vaunuista yhtämittaa kuului

iloinen nauru. Lopulta ilmestyi enkeli taivaasta ja sanoi: Sinä olet
valittu. Naura! Minä täytin hänen käskynsä ja yhtäkkiä tunsin, miten
sydämeeni syöksähti ihana valo, nälkä, jano ja väsymys katosi kuin
pyyhkäistynä ja sanoin kuvaamaton riemu täytti koko vapisevan
ruumiini. Nyt ymmärsin, että se oli Saatana, joka oli estänyt minua
totuudesta!
Oi, iloitse isä! Iloitse, että sinulla on sellainen poika! Ajattele:

vuosituhansia ovat ihmiskunnan suurimmat nerot uhranneet koko
elämänsä tuolle kysymykselle ja sen olen nyt minä ratkaissut! Minä
olen keksinyt elämän loimen salaisuuden.
Ja se on tämä: ihmiskunnan, kaikkien ihmisyksilöjen täytyy

kehittyä niin pitkälle kuin minä olen kehittynyt — että voi nauraa
kaikelle; tietää kaikki ja tuntea samaa, ääretöntä riemua kaikesta
olevaisesta, niinkuin minä ja muutamat valitut minun seurassani..
Tiedätkö, minä näin äsken taivaan — ja sen suunnaton,

pyörryttävä ilo oli tukehduttaa minut. Näetkös isä, se on niin kauhean
suurta, että se tuntui ensin mahdottomalta kestää, minä luulin
kuolevani, tukehtuvani. Mutta pian siihen totuin ja sitten vasta
ymmärsin, että olen kuolematon, suurin elävistä…
Niin, isä ja äiti, teitä palvellaan pian tuhansissa kirkoissa, miljoonat

kunnioittavat ja ylistävät teitä siitä, että olette minut kasvattanut —
että olette kasvattaneet Jumalan!
Jospa tietäisitte, miten äärettömän paljon onnea minun nauruni on

tuottanut! Samalla hetkellä haihtui kaikkien sotilasten jano ja nälkä,
haavoitetut paranivat ja noiden onnettomien tuska tuolla vaunuissa
muuttui sanomattomaksi riemuksi. He saivat palkan kärsimyksistään
— mutta vain minun tähteni. Ellen olisi nauranut, kituisivat he
vieläkin kauheissa kärsimyksissä!
Eikä siinä kyllin! Minä olen pelastanut koko maailman kärsivät —

janoiset ja nälkäiset ovat vihdoinkin kylläisiä, viattomasti vangitut
vapaita ja kaikki, jotka tuskissa kiemurtelivat ja vaikeroivat,
murheessa itkivät — he tanssivat nyt riemusta ja nauravat,
nauravat…
Tänään koettivat monet toverit taas mennä vaunuihin, yhteiseen
riemujuhlaan, mutta Saatanan valta oli vielä liian suuri — hänen
nuolensa kaatoivat heidät… Mutta se oli viimeinen kerta — pian
hänen valtansa loppuu! Ja minä tulen armotta rankaisemaan sen
kauhistavat rikokset!
Sunnuntaina.
Nyt on kaikki lopussa: tämä on hyvästijättöni.
En aavistanut sitä näin kamalaksi. Saatana tahtoi saattaa minut

häpeään, minä taistelin epätoivoisesti. Mutta se ponnisti viimeisetkin
voimansa — ja minä jouduin tappiolle.
Eilen olin suurin elävistä olennoista, lähin jumalasta — tänään

onnettomin kuolevaisista…
Ja se suunnaton onni, minkä olin kärsivälle maailmalle toimittanut

— sen pyyhkäisi Saatana paikalla pois tappioni jälkeen…
Kerron lyhyesti maailmalle miten se tapahtui.
Taivaallinen riemu vaunuissa kiihtyi niin valtavaksi, ettemme

voineet enää odottaa: tahdoimme yhtyä samaan iloon.
Käskin veljieni aukaista ovet ja sitten tulla ottamaan minut

riemukulussa. — Olin niin iloinen, etten voinut kävellä. Riemukkaasti
syöksyivät veljeni oville, mutta…
Niin, Saatanan nuolet vinkuivat ilmassa, veljiäni kaatui, kaatui… Ja

minulle tuli kamala aavistus, että viholliseni oli keksinyt jonkun
kavalan keinon. Kehoitin tovereita…
Mutta ei — emme päässeet… kaikki näytti olevan hukassa…
Silloin maailman lapset kuulivat hätämme, heidän silmänsä

aukenivat ja he hyökkäsivät kaikki avuksemme riemusta huutaen:
vihdoin lukot murrettiin, ovet aukaistiin…!
Tiesin näkeväni taivaan, jumalallinen voima täytti olentoni

väkevänä, huumaavana, se kohotti minut maasta: menin
ensimmäiselle ovelle, toiselle…
Voi, voi minua! — Voi Saatanan suurinta hirmutyötä! Luulin

näkeväni taivaan ja näinkin syvimmän helvetin… Samaan aikaan
kun sotilaani taistelivat, oli Saatana hirmuisella, pöyristyttävällä
tavalla surmannut enimmät puolet valituista. Voi, sitä näkyä — ei, en
kerro… Te kuolisitte isä, jos tietäisitte sen. Kamala löyhkä,
mädäntyneet jäsenet, mustuneet, matoiset ruumiit, korina, ulina,
nauru, kaikki tuntui tulvahtavan koskena vastaan… Ei — en voi elää!
Hyvästi, isä!
Myöhemmin.
Oi isä, minun täytyy sittenkin kirjoittaa sinulle tappiostani, joka

äsken unohtui — sillä se on suurin mitä iankaikkisuuden alusta
lähtien on tapahtunut. Eihän Luciferin tappio ollut mitään minun
tappioni rinnalla: minähän olen Saatanan voittama! — Ooh, nyt se
pilkkaa minua!
Heti määräsi se vaunuihin laumoittain nauravia piruja. Ja

tehdäkseen tuskani tuhatkertaiseksi, koettavat he inhoittavalla
määkinällään matkia valittujen ihanaa ilonaurua — ja aina välillä
viiltää ilmaa ikäänkuin jonkun jättiläisorhin hirveä hirnunta: Saatanan
pilkkanauru.
Nyt alkavat tappioni seuraukset näkyä: ilma on jo jähmettynyt

ikäänkuin kirkkaaksi hyytelöksi, sotilaat ovat tukehtua sitä
hengittäessään… Niin, nyt tiedän: Saatana aikoo tukehduttaa koko
ihmiskunnan…. Nythän sillä on kaikki valta, kun se kerran minut
voitti… Taivas pimenee, aurinko näyttää punertuvan
verenkarvaiseksi.
Oi jumala: jos sinä vielä kerran auttaisit, niin ehkä me yhdessä

voittaisimme Saatanan. Älä anna minun joutua häpeään — sinähän
itse minut korotit!
Ei — hänkin on minut hyljännyt: minun täytyy vain voimattomana

katsella, kun ihmiset vähitellen tukehtuvat, kiemurtelevat…
Aurinko on jo mustansinisten länttien peitossa — aivankuin

jättiläissuuri, verintahrattu, mädäntynyt maksa; kuu muistuttaa
karvasäkkiä… tähdet sammuvat taivaalla, putoilevat… Nyt juuri
putosi eräs Saharan kohdalle, puhkasi pinnan, syöksyen suoraan
maan sisuksiin ja koko Pohjois-Afrika on nyt äärettömän tulivuoren
aukkona — tänne asti kuuluu tulen kohina… Tähden iskusta luiskahti
maa pois radaltaan, kiitää nyt avaruudessa yhä kiihtyvällä
vauhdilla… Ohi tuhansien tähtien, halki tuntemattomien
aurinkokuntien. Ja pyörii, pyörii…
Jumala — minä kiitän sinua, että annoit minun järkeni vielä kerran
leimahtaa, keksiä nerokkaan suunnitelman, jottei minun tarvitse
tukehtua: ammun kuulan sydämeeni! Hyvästi isä!
Kauhea kiire: täytyy saada tämä postiin ennenkuin maailma
häviää… Ooh… Nyt ei ole enää muita eläviä olentoja kuin minä…
Musta aurinko putoo alaspäin suoraan minua kohden ja sen jälessä
kymmenittäin sinisiä tähtiä… Ne suurenevat kammottavan
nopeasti… pusertaen ilman kivikovaksi… En voi enää… lähden…»
»K. H.
Poikanne ystävänä ja yliopistotoverina lähetän teille tämän

muistikirjan, jonka hän itse on sulkenut. Liitän samaan yhteyteen
myöskin hänen kellonsa, sormuksensa ja medaljongin
valokuvineen.
Nämä rakkaat muistot tuovat teille sanoittakin surusanoman.

Mutta te kyllä kestätte ja kannatte sen pystypäisenä, sillä teillä on
niin paljon, josta voitte olla ylpeä.
Ensiksi siitä, että teillä on tuollainen poika; toiseksi, että olette

uhrannut hänet isänmaalle, antanut rakkaimman, mitä teillä oli:
ainoan jälelläolevan poikanne. Kolmanneksi saatte ylpeillä siitä,
että hän on saavuttanut ihanimman kuoleman, mikä ihmisen osaksi
saattaa tulla: sankarikuoleman taistelussa vihollista vastaan —
isänmaan puolesta.
Hänet oli löydetty kentältä jalo sydämensä lävistettynä… Toisin ei

hän saattanutkaan kuolla. Sen urhoollisempaa soturia, parempaa
toveria ei voi löytää. Hänen nimensä tulee toisten sankarinimien
mukana säilymään isänmaan ylpeytenä, kunniana ja…»
Kirje putoaa vanhan miehen kädestä lattialle. Hän istuu siinä kuin
jähmettyneenä, aivankuin jokin salaperäinen kylmyys olisi
jäädyttänyt koko ruumiin…
Silloin tuntuu hänen sydämensä taas vavahtavan: hän on taas
kuulevinaan ilkeän, sähisevän kuiskauksen:
— Mutta… entäs kaksi vuotta sitten…?
— Vaikene… vaikene! — änkyttää vanhus vaalein, vapisevin

huulin.
Vanha mies istuu kauan pehmeässä nojatuolissa liikkumattomana

samassa asennossa, sama sammunut sikaari suussa ja pitkä elämä
kiitää nopeana kuvasarjana hänen sielunsa silmien editse. Hän on
menettänyt elämässä niin paljon: vaimonsa, kuusi poikaansa, yhden
toisensa jälkeen — mutta hän ei koskaan ollut tuntenut sellaista
tuskaa, kuin nyt, ei milloinkaan kärsinyt niin kovin… Sillä tämä oli
viimeinen — hänellä ei ole enää ketään… Hän ei itke, ei valita, eikä
repele tukkaansa — harmaa pää vain on vaipunut rinnalle
hervottomana. Nuo ryppyiset, kumartuneet kasvot himmeine,
tuijottavine silmineen, näyttävät jähmettyneen sanomattomaan
suruun ja epätoivoon, — niinkuin kuolleen kasvoille joskus jää
erityinen ilme, muistuttamaan vainajan viime ajatuksesta.
Ja noissa vanhoissa kasvoissa kuvastuu vain yksi ajatus, yksi

tunne — yhtä tuskallisena ja jähmettyneenä kuin kuoleman hyisen
kouran painamana. Sillä se on hänelle surullisempi ja tuskallisempi
kuolemaa, pelottavampi kuin iankaikkisuus. Se kaikuu hänen
korvissaan taukoamatta kuni hautakellojen kumina:
— Yksin, yksin.
— Kaksi vuotta! — kuuluu jostakin saatanallinen sähähdys.

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Answer to Discussion Question

5. Hedging is the process of eliminating exposure to foreign exchange risk so as to avoid

9. An enterprise is required to recognize all derivative financial instruments as assets or

1. C (Foreign exchange gain/loss on foreign currency transaction)

An import purchase causes a foreign currency payable to be carried on the

2. D (Method of accounting for foreign currency transactions)

Current accounting standards require a two-transaction perspective,

3. A (Foreign exchange gain/loss on foreign currency transaction)

Foreign exchange gains related to foreign currency import purchases are

4. B (Calculate foreign exchange gain/loss on foreign currency transaction)

5. C (Calculate foreign exchange gain/loss on foreign currency borrowing)

6. B (Foreign exchange gain/loss on foreign currency transaction)

7. B (Calculate foreign exchange gain/loss)

The merchandise purchase results in a foreign exchange gain of $10,000,

8. A (Forward contract cash flow hedge of foreign currency denominated

9. C (Forward contract fair value hedge of foreign currency firm commitment)

10. A (Determine the fair value of a forward contract)

11. C (Calculate foreign exchange gain/loss on foreign currency transaction)

12. B (Forward contract fair value hedge of foreign currency denominated

The nominal value of the forward contract on December 31, 2017 is a

13. A (Forward contract cash flow hedge of forecasted foreign currency

The krona is selling at a premium in the forward market, causing Pimlico to

3/1 no journal entries

6/1 Premium Expense 10,000

Foreign Currency 57,500

14. B (Option cash flow hedge of forecasted foreign currency transaction)

This is a cash flow hedge of a forecasted transaction. The original cost of

15-17. (Option fair value hedge of a foreign currency firm commitment)

Loss on Firm Commitment 2,019.70

Foreign Currency (C$) 77,000.00

Firm Commitment 3,000.00

Net impact on 2018 net income:

17. B Net cash inflow with option ($80,000 – $2,000) $78,000

6/1 no journal entries

6/30 Forward Contract 2,400

Loss on Firm Commitment 2,400

Net impact on second quarter net income is $0.

7/31 Loss on Forward Contract 400

21-22. (Option cash flow hedge of a forecasted foreign currency transaction)

Option Expense decreases net income by $400.

Foreign Currency (BRL) [200,000 x $.41] 82,000

Parts Inventory 82,000

Accumulated Other Comprehensive Income (AOCI) 2,000

Net impact on 2018 net income:

23. (10 minutes) (Foreign currency payable – import purchase)

24. (10 minutes) (Foreign currency receivable – export sale)

25. (10 minutes) (Foreign currency receivable – export sale)

9/15 Accounts Receivable (crowns) [100,000 x $.60] 60,000

9/30 Accounts Receivable (crowns) 6,000