On January 1, 2017, Roxan Company sold equipment to Mitsuko Company of Japan for ¥20,000,000 with payment to be received in two years on January 1, 2019. On January 1, 2017, the exchange rate is ¥0.50 = P1. On the same date, Roxan enters into a futures contract and agrees to sell ¥20,000,000 on January 1, 2019 at the rate of ¥0.50 = P1. On December 31, 2017, the exchange rate is ¥0.47 = P1. On December 31, 2019, the exchange rate is ¥0.55 = P1. The appropriate discount rate throughout this period is 10%. Required: Make all journal entries necessary on Roxan Company's books in 2017, 2018, and 2019 to record this sale, the futures contract and the collection of the receivables.

On January 1, 2017, Roxan Company sold equipment to Mitsuko Company of Japan for ¥20,000,000 with payment to be received in two years on January 1, 2019. On January 1, 2017, the exchange rate is ¥0.50 = P1. On the same date, Roxan enters into a futures contract and agrees to sell ¥20,000,000 on January 1, 2019 at the rate of ¥0.50 = P1. On December 31, 2017, the exchange rate is ¥0.47 = P1. On December 31, 2019, the exchange rate is ¥0.55 = P1. The appropriate discount rate throughout this period is 10%. Required: Make all journal entries necessary on Roxan Company's books in 2017, 2018, and 2019 to record this sale, the futures contract and the collection of the receivables.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 18QA

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