Journal Questions
CFD—Functional Currency US$
Stamford Fund had the following trades in Alcoa in the CFD market. The counterparty is Robinson & Co., which takes a margin of 10 percent of the value of the contract upfront. The funding cost of a long position is calculated at 2 percent per month for overnight carry of position. Brown & Co. pays interest at 6 percent per annum on the margin money deposited with them.
Stamford Fund introduced $1 million on January 1. The market rate of Alcoa fluctuated widely, triggering a margin call. Stamford Fund decided to make a deposit of $200,000 in the margin account on that date. Valuation dates are month ends. Prepare journal entries, general ledgers, trial balance, income statement, and balance sheet as of February 15, when the interest on margin account is also computed.
Date Expiry Quantity Rate (US$) Long/Short Brokerage
29-Jan-X1 15-Feb-X1 10,000 $65 Long $700
5-Feb-X1 15-Feb-X1 3,500 $72 PartialTermination $200
Date Market Price
29-Jan-X1 67
30-Jan-X1 68
31-Jan-X1 70
1-Feb-X1 72
2-Feb-X1 78
5-Feb-X1 73
6-Feb-X1 78
7-Feb-X1 80
8-Feb-X1 77
9-Feb-X1 75
12-Feb-X1 83
13-Feb-X1 80
14-Feb-X1 83
15-Feb-X1 75
CFD—Trade Currency SGD
Asian Fund had the following trades in SingTel in the CFD market. The counterparty is Jing Jang & Co., which collects a margin of 10 percent of the value of the contract up front. The funding cost of a long position is calculated at 2 percent per month for overnight carry of position. Jing Jang & Co. pays interest at 6 percent per annum on the margin money deposited with them. The fund introduced US$ 1 million on February 1. On the same day, Asian Fund converted $500,000 into SGD at 1.45.
There was a margin call on March 4 and Asian Fund decided to make a deposit of SGD 500,000 in the margin account on that date. Valuation dates are month ends. Prepare journal entries, general ledgers, trial balance, income state-ment, and balance sheet as of March 15, when the interest on margin account is also computed.
Date Expiry Quantity Rate Long/Term Brokerage (SGD)
26-Feb-X1 15-Mar-X1 12,000 SGD 55 Long 1,200
5-Mar-X1 15-Mar-X1 4,500 SGD 48 PartialTermination 450
Date Market Price FX Rate
26-Feb-X1 55 1.47
27-Feb-X1 54 1.46
28-Feb-X1 55 1.45
1-Mar-X1 52 1.46
2-Mar-X1 50 1.47
5-Mar-X1 49 1.49
6-Mar-X1 50 1.50
7-Mar-X1 51 1.54
8-Mar-X1 52 1.57
9-Mar-X1 53 1.52
12-Mar-X1 55 1.51
13-Mar-X1 57 1.55
14-Mar-X1 59 1.57
15-Mar-X1 58 1.54
CFD—Trade Currency JPY
Kyoto Fund had the following trades in PQR shares in the CFD market. The counterparty is Yamashita & Co., which collects a margin of 15 percent of the value of the contract upfront and the funding cost of long position is calculated at 1 percent per month for overnight carry of position. Jing Jang & Co. pays interest at 3 percent per annum on the margin money deposited with them. The fund introduced US$ 1 million on February 1. On the same day, Kyoto Fund converted $500,000 into JPY at 117.
There was a margin call on March 7, and Kyoto Fund decided to make a deposit of JPY 5 million in the margin account on that date. Valuation dates are month ends. Prepare journal entries, general ledgers, trial balance, income statement, and balance sheet as of March 15, when the interest on margin account is also computed.
Date Expiry Quantity Rate Long/Term Brokerage
26-Feb-X1 15-Mar-X1 3,000 JPY 2250 Long JPY 5600
5-Mar-X1 15-Mar-X1 1,250 JPY 2600 PartialTermination JPY 2600
Date Market Price FX Rate
26-Feb-X1 2250 117
27-Feb-X1 2350 116
28-Feb-X1 2450 115
1-Mar-X1 2550 116
2-Mar-X1 2450 114
5-Mar-X1 2350 116
6-Mar-X1 2450 117
7-Mar-X1 2550 118
8-Mar-X1 2650 119
9-Mar-X1 2750 121
12-Mar-X1 2850 122
13-Mar-X1 2750 121
14-Mar-X1 2650 120
15-Mar-X1 2550 118
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