Question

Nick Andros of Streamline Company suggested that the company speculate in foreign currency as a partial hedge against its operations in the cattle market, which fluctuates like a commodity market. On October 1, 20X1, Streamline bought a 180-day forward contract to purchase 50,000,000 yen (¥) at a forward rate of ¥1 = $0.0075 when the spot rate was $0.0070. Other exchange rates were as follows:


Required
a. Prepare all journal entries related to Streamline Company’s foreign currency speculation from October 1, 20X1, through March 31, 20X2, assuming the fiscal year ends on December 31, 20X1.
b. Did Streamline Company gain or lose on its purchase of the forward contract?Explain.


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  • CreatedMay 23, 2014
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