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On October 2, 2016, Flx, a U.S. company, entered into a forward contract to purchase 50,000 euros for delivery in 180 days at a forward rate of $0.6350. The forward contract is a derivative instrument hedging an identifiable foreign currency

On October 2, 2016, Flx, a U.S. company, entered into a forward contract to purchase 50,000 euros for delivery in 180 days at a forward rate of $0.6350. The forward contract is a derivative instrument hedging an identifiable foreign currency purchase commitment for inventory as defined in ASC Topic 815. The spot rate for euros on October 2, 2016 was $0.6250. Spot rates and forward rates for euros on December 31, 2016, and March 31, 2017, are as follows:
On October 2, 2016, Flx, a U.S. company, entered into

REQUIRED:
Prepare journal entries to:
1. Record the forward contract on October 2, 2016
2. Adjust the accounts at December 31, 2016
3. Account for settlement of the forward contract and record and adjust the related cash purchase on March 31, 2017

Transcribed Image Text:

December 31,2016 $0.6390 March 31, 2017 Spot rate Forward rates $0.6560 30-day futures 90-day futures 180-day futures $0.6410 $0.6420 $0.6450 $0.6575 $0.6615 $0.6680

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1 Entry on October 2 2016 Contract receivable euros A 31750 Contract payable L 31750 To record forwa…View the full answer


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Related Book For  answer-question
Advanced Accounting

Advanced Accounting

ISBN: 978-0134472140

13th edition

Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith

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Question Details
Chapter # 13
Section: Problems
Problem: 6
Posted Date: February 28, 2017 12:12:43
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