On June 1, ACL International, a U.S. confectionery products manufacturer, purchases on account bulk chocolate from a
Question:
On June 1, ACL International, a U.S. confectionery products manufacturer, purchases on account bulk chocolate from a Swiss supplier for 166,667 Swiss francs (CHF) when the spot rate is $0.90 = CHF 1. The Swiss franc payable is due on September 1. To minimize its exposure to an exchange loss should the franc appreciate relative to the dollar prior to payment, ACL International acquires a forward contract to exchange $103,334 for francs on September 1 at a forward rate of $0.92 = CHF 1.
Required:
Given the following exchange rate information, provide journal entries to account for the forward exchange contract on June 1, June 30, and September 1. The company closes its books quarterly.
June 30 spot rate $0.91 = CHF 1
September 1 spot rate $0.93 = CHF 1
What is the effective dollar cost of the Swiss chocolate purchase in Exercise 7? Show your calculations.
Exchange RateThe value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
Step by Step Answer:
a Journal entries 61 CHF Contract receivable 150000 Deferred premium 3333 Contract payable 153333 To record contract with the foreign currency dealer ...View the full answer
