On July 1, 2013, Owens Corporation places an order with a European supplier for manufacturing equipment for
Question:
a. Using a discount rate of 8% per year, give the journal entries that Owens Corporation would make on July 1, 2013, December 31, 2013, and June 30, 2014, to account for the purchase commitment and the forward contract. Owens Corporations accounting period is the calendar year.
b. How would the journal entries in part a differ if Owens Corporation designates the forward contract as a cash flow hedge instead of a fair value hedge?
c. Suggest a scenario that would justify the firm treating the forward contract as a fair value hedge and a scenario that would justify treating it as a cash flowhedge.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
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Related Book For
Financial Accounting An Introduction to Concepts, Methods and Uses
ISBN: 978-1133591023
14th edition
Authors: Roman L. Weil, Katherine Schipper, Jennifer Francis
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