On January 1, 2017, Song delivers merchandise to Prabu for 250,000,000 Indonesian rupiah when the spot rate for the rupiah is 0.39 rupiah. The receivable is due on February 28, 2017. In addition, on January 1, Song enters into a 60-day forward contract to hedge its foreign currency assets at a forward rate of 0.37 rupiah. The spot rate for the rupiah on 28 February 2017 is 0.35 rupiah. REQUIRED 1. Prepare journal entries to record the receivable from the sales transaction and the forward contract on January 1 2. Prepare journal entries to record collection of the receivable and settlement of the forward contract on February 28.

On January 1, 2017, Song delivers merchandise to Prabu for 250,000,000 Indonesian rupiah when the spot rate for the rupiah is 0.39 rupiah. The receivable is due on February 28, 2017. In addition, on January 1, Song enters into a 60-day forward contract to hedge its foreign currency assets at a forward rate of 0.37 rupiah. The spot rate for the rupiah on 28 February 2017 is 0.35 rupiah. REQUIRED 1. Prepare journal entries to record the receivable from the sales transaction and the forward contract on January 1 2. Prepare journal entries to record collection of the receivable and settlement of the forward contract on February 28.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter13: Marketable Securities And Derivatives

Section: Chapter Questions

Problem 22E

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On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 100,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 100,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:Bernard’s incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.a. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.b. What is the impact on net income in 2017?c. What is the impact on net income in 2018?
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On December 1, 2017, Ringling Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,000,000 pesos on March 1, 2018. The following U.S. dollar per peso exchange rates apply: Date Spot Rate ForwardRate (to March 1, 2018)Dec1, 2017 $0.044 $0.047 Dec 31, 2017 0.046 0.049 March 1, 2018 0.050 N/A Ringling’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803.Which of the following correctly describes the manner in which Ringling Company will report the forward contract on its December 31, 2017, balance sheet? Choose the correct.a. As an asset in the amount of $1,960.60.b. As an asset in the amount of $2,940.90.c. As a liability in the amount of $980.30.d. As a liability in the amount of $2,940.90.
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On April 1, 2017, Mendoza Company borrowed 500,000 euros for one year at an interest rate of 5 percent per annum. Mendoza must make its first interest payment on the loan on October 1, 2017, and will make a second interest payment on March 31, 2018, when the loan is repaid. Mendoza prepares U.S.-dollar financial statements and has a December 31 year-end. Prepare all journal entries related to this foreign currency borrowing assuming the following exchange rates for 1 euro:
On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 100,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 100,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply: Date Spot rate Forward rate (to April 30, 2018) November 1, 2017 $0.21 $0.20 December 31, 2017 0.19 0.17 April 30, 2018 0.18 N/A Bernard’s incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.a. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.b. What is the impact on net income in 2017?c. What is the impact on net income in 2018?
Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2017, with payment of 16,000 korunas to be received on March 1, 2018. Brandlin enters into a forward contract on December 1, 2017, to sell 16,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows:Brandlin’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Brandlin must close its books and prepare financial statements at December 31.a. Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars. What is the impact on 2017 net income? What is the impact on 2018 net income? What is the impact on net income over the two accounting periods?b. Assuming that Brandlin…
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On December 15, 2020, Lisbeth Inc. (a U.S.-based company) purchases merchandise inventory from a foreign supplier for 50,000 schillings. Lisbeth agrees to pay in 45 days, after it sells the merchandise. Lisbeth makes sales rather quickly and pays the entire obligation on January 25, 2021. Currency exchange rates for 1 schilling are as follows: Date U.S. Dollar per Schilling December 15, 2020 $ 0.28 December 31, 2020 0.30 January 25, 2021 0.33 January 31, 2021 0.34 Prepare all journal entries for Lisbeth Company in connection with this purchase and payment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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