On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to sell

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On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to sell 100,000 rubles in four months (on January 31, 2018) and receive $39,000 in U.S. dollars. Exchange rates for the ruble follow:

On October 1, 2017, Sharp Company (based in Denver, Colorado)

Sharp's incremental borrowing rate is 12 percent. The present value factor for one month at an annual interest rate of 12 percent (1 percent per month) is 0.9901. Sharp must close its books and prepare financial statements on December 31.
a. Prepare journal entries, assuming that Sharp entered into the forward contract as a fair value hedge of a 100,000 ruble receivable arising from a sale made on October 1, 2017. Include entries for both the sale and the forward contract.
b. Prepare journal entries, assuming that Sharp entered into the forward contract as a fair value hedge of a firm commitment related to a 100,000 ruble sale that will be made on January 31, 2018. Include entries for both the firm commitment and the forward contract. The fair value of the firm commitment is measured by referring to changes in the forward rate.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For  answer-question

Advanced Accounting

ISBN: 978-1259444951

13th edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni

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