Question

Refer to P8- 5 and assume that the remaining payment of US$ 20,000 is due on January 1, 20X9. FX enters into a forward contract with a bank on December 1, 20X8, to buy US$ 20,000 for delivery on January 1, 20X9. The relevant forward rate on December 1, 20X8, was C$ 1 = US$ 0.9950. Assume that the forward rate and spot rate on December 31, 20X8, and the spot rate on January 1, 20X9, were the same (i. e., US$ 1.0000).

Required
1. Should FX Corporation use hedge accounting in this situation? Why or why not?
2. Prepare all relevant journal entries related to the purchase of the equipment and the hedge for 20X8 and 20X9.



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  • CreatedMarch 13, 2015
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