1. (25 pts) Shannon Company has agreed to buy on September 1, 2018 Inventory for delivery...
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1. (25 pts) Shannon Company has agreed to buy on September 1, 2018 Inventory for delivery on March 1, 2019 from a € 500,000 and the bill will be settled German supplier. The cost of the equipment is in Euros. The purchase qualfies as a firm purchase commitment, as a contract was signed on September 1, 2018. Shannon enters into a forward contract to buy the needed Euros on March 1 at the 180 day forward rate. Exchange rates for 1.0 Euro are as follows Sep 1 Dec 31 March 1 Spot 180 day forward 60 day forward Record the entries need on September 1. Record the entries needed at year end, December 31. Dr. Dr. $1.34 $1.38 $1.37 Cr. Cr. $1.39 $1.44 $1.40 $1.43 $1.45 $1.44 Record the entries need on March 1, including the purchase of the inventory. Dr. Cr. Assume instead that this is not a firm purchase commitment but rather an anticipated purchase. Dr. Cr. Record the entries needed at September 1. Record the entries needed at December 31. Assume that the inventory was never purchased. Record the entries needed on March 1. 1. (25 pts) Shannon Company has agreed to buy on September 1, 2018 Inventory for delivery on March 1, 2019 from a € 500,000 and the bill will be settled German supplier. The cost of the equipment is in Euros. The purchase qualfies as a firm purchase commitment, as a contract was signed on September 1, 2018. Shannon enters into a forward contract to buy the needed Euros on March 1 at the 180 day forward rate. Exchange rates for 1.0 Euro are as follows Sep 1 Dec 31 March 1 Spot 180 day forward 60 day forward Record the entries need on September 1. Record the entries needed at year end, December 31. Dr. Dr. $1.34 $1.38 $1.37 Cr. Cr. $1.39 $1.44 $1.40 $1.43 $1.45 $1.44 Record the entries need on March 1, including the purchase of the inventory. Dr. Cr. Assume instead that this is not a firm purchase commitment but rather an anticipated purchase. Dr. Cr. Record the entries needed at September 1. Record the entries needed at December 31. Assume that the inventory was never purchased. Record the entries needed on March 1.
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Answer rating: 100% (QA)
Answer Solution Date General Ledger 192018 Prepaid forward contract premium AcDr To Fo... View the full answer
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
Posted Date:
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