A U.S. company sells merchandise to a German customer on May 1 for €1,000,000. The customer pays the bill on August 1. To hedge foreign exchange risk, on May 1 the U.S. company enters a forward sale contract for €1,000,000 with an August 1 delivery date. On August 1, the company collects the€1,000,000 from the customer and closes the forward contract. The company’s fiscal year ends June 30.

Relevant rates ($/€) are as follows:

Required

Make the journal entries to record the above events, including appropriate year-end adjusting entries.

  

Transcribed Image Text:

Forward Rate for August 1* Delivery $ 1.148 Spot Rate May 1 $1.145 June 30 1.135 1.136 August 1 1.130 1.130 Forward Rate for August 1* Delivery $ 1.148 Spot Rate May 1 $1.145 June 30 1.135 1.136 August 1 1.130 1.130

Answer rating: 100% (QA)

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