Manitoba Exporters Inc. (MEI) sells Inuit carvings to countries throughout the world. On December 1, Year 5,
Question:
The fiscal year-end of MEI is December 31, and on this date the spot rate was FC1 = $0.757 and the forward rate was FC1 = $0.791. The payment from the foreign customer was received on April 1, Year 6, when the spot rate was FC1 = $0.802.
Required:
(a) Prepare the journal entries to record
(i) The sale and the forward contract,
(ii) Any adjustments required on December 31, and
(iii) The cash received in Year 6.
(b) Prepare a partial balance sheet of MEI on December 31, Year 5,that shows the presentation of the receivable and the accounts associated with the forward contract.
*(c) Now assume that a discount rate of 6% per annum, or 0.5% per month, is applied when determining the fair value of the forward contract at December 31, Year 5. Prepare the journal entries to record
(i) The sale and the forward contract,
(ii) Any adjustments required on December 31, and
(iii) The cash received in Year 6.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell
Question Posted: