On July 1, 2021, Company A sold some limited edition art prints to B Company for ¥26,352,000 to be paid on January 1, 2022. The current exchange rate on July 1, 2021, was ¥108=$1, so the total payment at the current exchange rate would be equal to $244,000. Company A entered into a forward contract with a large bank to guarantee the number of dollars to be received. According to the terms of the contract, if ¥26,352,000 is worth less than $244,000, the bank will pay A the difference in cash. Likewise, if ¥26,352,000 is worth more than $244,000, A must pay the bank the difference in cash.

Required:

1.  Prepare all necessary journal entries on Company A’s book at July 1, 2021.

2.  Prepare all necessary journal entries on Company A’s book at December 31, 2021, assuming that the exchange rate is ¥100=$1.

3.  Prepare all necessary journal entries on Company A’s book at January 1, 2022.

Answer rating: 100% (QA)

Answer Journal entries in the books of A Company at July 12021 Date Journal Entry Debit Amount Credi... View the full answer