Question

Berke Company purchased equipment from Norway for 140,000 krones (NOK) on December 16, 2013, with payment due on February 14, 2014. On December 16, 2013, Berke also acquired a 60-day forward contract to purchase krones at a forward rate of NOK 1 = C$.182. On December 31, 2013, the forward rate for an exchange on February 14, 2014, is NOK 1 = C$.192. The spot rates were:
December 16, 2013 ....... NOK 1 = C$.187
December 31, 2013 ....... NOK 1 = C$.195
February 14, 2014....... NOK 1 = C$.192
Required
(a) Prepare journal entries for Berke Company to record the purchase of equipment, all entries associated with the forward contract, the entries on December 31, 2013, and entries to record the payment on February 14, 2014.
(b) What was the effect on the income statement of the hedged transaction for the year ended December 31, 2013?
(c) What was the overall effect on the income statement of this transaction from December 16, 2013, to February 14, 2014?


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  • CreatedJune 09, 2015
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