Q: On November 1, 2010, Mayberry Corporation, a U.S. corporation, purchased from Cantata Corporation, a Mexican company, some machinery that cost 1,000,000 pesos. The invoice was
On November 1, 2010, Mayberry Corporation, a U.S. corporation, purchased from Cantata Corporation, a Mexican company, some machinery that cost 1,000,000 pesos. The invoice was payable in pesos on January 30, 2011. To hedge against rapid changes in the peso, Mayberry entered into a forward contract on November 1, 2010 with AB Trader & Company, a US brokerage and investment firm. The contract specified that Mayberry would buy 1,000,000 pesos from AB Trader at $0.084 per peso for settlement on January 30, 2011. Assume that all three companies are subject to the same accounting standards and have December 31st year-ends. The spot rates for pesos on November 1, December 31, and January 30, are $0.082, $0.080, and $0.089, respectively. The 30-day forward rate for pesos on December 31, 2010 is $0.083. The forward contract is not settled net.
Required :
Record General Journal entries for Mayberry Corporation on November 1, December 31, and January 30. If no entry is required on a particular date, indicate "No entry" in the General Journal. This is a fair value hedge.
Step by Step Solution
3.39 Rating (161 Votes )
There are 3 Steps involved in it
Step: 1

Get a step-by-step solution from a verified subject matter expert – not AI-generated answers
Step: 2Unlock detailed examples and clear explanations to master concepts

Step: 3Unlock to practice, ask and learn with real-world examples

See step-by-step solutions with expert insights and AI powered tools for academic success
-
Access 30 Million+ textbook solutions.
-
Ask unlimited questions from AI Tutors.
-
24/7 Expert guidance tailored to your subject.
-
Order free textbooks.
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Study Smart with AI Flashcards
Access a vast library of flashcards, create your own, and experience a game-changing transformation in how you learn and retain knowledge
Explore Flashcards