On November 1, 2015, Ambrose Company sold merchandise to a foreign customer for 100,000 FCUs with payment to be received on April 30, 2016. At the date of sale, Ambrose entered into a six-month forward contract to sell 100,000 LCUs. It properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:

Ambrose’s incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.
a. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.
b. What is the impact on net income in 2015?
c. What is the impact on net income in2016?

  • CreatedJanuary 08, 2015
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