Mar, a U.S. firm, purchased equipment for 400,000 British pounds from The on December 16, 2016. The
Question:
Mar, a U.S. firm, purchased equipment for 400,000 British pounds from The on December 16, 2016. The terms were n/30, payable in British pounds.
On December 16, 2016, Mar also entered into a 30-day forward contract to hedge the account payable to Thc. The forward contract is settled net. Exchange rates for British pounds on selected dates are as follows:
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REQUIRED
1. Assuming this situation qualifies as a cash-flow hedge, prepare journal entries on December 16, 2016, to record Mar's purchase and the forward contract. A 6 percent interest rate is appropriate.
2. Prepare year-end journal entries for Mar as needed on December 31, 2016.
3. Prepare journal entries for Mar's settlement of its accounts payable and the forward contract on January 15, 2017.
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
Step by Step Answer:
1 December 16 2016 Equipment A 668000 Accounts payable fc L 668000 To record purchase of equipment 400000 pounds x 167 2 December 31 2016 Accounts pay...View the full answer
Advanced Accounting
ISBN: 978-0134472140
13th edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
