Crystal Exporting Co is a U S wholesaler engaged in foreign
Crystal Exporting Co. is a U.S. wholesaler engaged in foreign trade. The following transactions are representative of its business dealings. The company uses a periodic inventory system and is on a calendar-year basis. All exchange rates are direct quotations.
Dec. 1 Crystal Exporting purchased merchandise from Chang’s Ltd., a Hong Kong manufacturer. The invoice was for 210,000 Hong Kong dollars, payable on April 1. On this same date, Crystal Exporting acquired a forward contract to buy 210,000 Hong Kong dollars on April 1 for $.1314.
Dec. 29 Crystal Exporting sold merchandise to Zintel Retailers for 120,000 Hong Kong dollars, receivable in 90 days. No hedging was involved.
April 1 Crystal Exporting received 120,000 Hong Kong dollars from Zintel Retailers.
1 Crystal Exporting submitted full payment of 210,000 Hong Kong dollars to Chang’s, Ltd., after obtaining the 210,000 Hong Kong dollars on its forward contract. Spot rates and the forward rates for the Hong Kong dollar were as follows:


Required:
A. Prepare journal entries for the transactions including the necessary adjustments on December 31.
B. Explain the income statement treatment given to any transaction gains and losses recognized at December31.
Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help