P11-27 Comprehensive Problem: Uses of Forward Exchange Contracts without Time Value of Money Considerations LO 11-3 On December 1, 20x1, Micro World Inc. entered into a 120-day forward contract to sell 100,000 Australian dollars (A$). Micro World's fiscal year ends on December 31. The direct exchange rates follow: Date December 1, 20X1 December 31, 20X1 January 30, 20X2 March 31, 20X2 Spot Rate $0.600 0.610 0.608 0.602 Forward Rate for March 31, 20X2 $0.609 0.612 0.605 2. The forward contract was to hedge an anticipated sale of furniture on January 30. The sale took place on January 30 with payment due on March 31, 20X2. The derivative is designated as a cash flow hedge. The company uses the forward exchange rate to measure hedge effectiveness. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 6 8 9 10 > Record the 120-day forward contract signed as a cash flow hedge of the forecasted foreign currency transaction of the sale of furniture on January 30 for A$100,000 Note: Enter debits before credits. General Journal Debit Credit Date Dec. 1, 20X1 Record entry Clear entry View general journal Journal entry worksheet 6 9 10 > Record the revaluation of the foreign currency payable to fair value and record OCI for the effective portion of the change in fair value of the derivative designated as a cash flow hedge. Note: Enter debits before credits. General Journal ebit | Credit Date Dec. 31, 20X1 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet Record the revaluation of the foreign currency payable to the current U.S. dollar equivalent and record OCI for the effective portion of the change in fair value of the derivative designated as a cash flow hedge. Note: Enter debits before credits. Date General Journal Debit Credit Jan. 30, 20X2 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet Record the sale of the furniture and its value at the spot rate. Note: Enter debits before credits. Date General Journal Debit Credit Jan. 30, 20X2 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet 9 10 > Record the revaluation of the foreign currency payable and record into OCI the effective portion of change in fair value of the derivative designated as a cash flow hedge. Note: Enter debits before credits. General Journal Debit Credit Date Mar. 31, 20X2 X This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet Record the revaluation of the foreign currency receivable using the spot rate and recognizing the change into current earnings as specified by ASC 830. Note: Enter debits before credits. Date General Journal Debit Credit Mar. 31, 20x2 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet 9 10 > Record the reclassification amount from OCI sufficient to completely offset the foreign currency transaction loss on the foreign currency receivable (A$) that was hedged with a derivative designated as a cash flow hedge. Note: Enter debits before credits. General Journal Debit Credit Date Mar. 31, 20X2 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet CO @ 66 8 10 > Record the receipt of U.S. dollars from an exchange broker. Note: Enter debits before credits. General Journal Debit Date Mar. 31, 20X2 Credit This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet UUUUUUUUUUUL Record the 120-day forward contract signed as a cash flow hedge of the forecasted foreign currency transaction of the sale of furniture on January 30 for A$100,000 Note: Enter debits before credits. General Journal Debit Credit Date Dec. 1, 20X1 Record entry Clear entry View general journal Journal entry worksheet 6 9 10 > Record the revaluation of the foreign currency payable to fair value and record OCI for the effective portion of the change in fair value of the derivative designated as a cash flow hedge. Note: Enter debits before credits. General Journal ebit | Credit Date Dec. 31, 20X1 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet Record the revaluation of the foreign currency payable to the current U.S. dollar equivalent and record OCI for the effective portion of the change in fair value of the derivative designated as a cash flow hedge. Note: Enter debits before credits. Date General Journal Debit Credit Jan. 30, 20X2 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet Record the sale of the furniture and its value at the spot rate. Note: Enter debits before credits. Date General Journal Debit Credit Jan. 30, 20X2 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet 9 10 > Record the revaluation of the foreign currency payable and record into OCI the effective portion of change in fair value of the derivative designated as a cash flow hedge. Note: Enter debits before credits. General Journal Debit Credit Date Mar. 31, 20X2 X This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet Record the revaluation of the foreign currency receivable using the spot rate and recognizing the change into current earnings as specified by ASC 830. Note: Enter debits before credits. Date General Journal Debit Credit Mar. 31, 20x2 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet 9 10 > Record the reclassification amount from OCI sufficient to completely offset the foreign currency transaction loss on the foreign currency receivable (A$) that was hedged with a derivative designated as a cash flow hedge. Note: Enter debits before credits. General Journal Debit Credit Date Mar. 31, 20X2 This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet CO @ 66 8 10 > Record the receipt of U.S. dollars from an exchange broker. Note: Enter debits before credits. General Journal Debit Date Mar. 31, 20X2 Credit This is a numeric cell, so please enter numbers only. Record entry Clear entry View general journal Journal entry worksheet UUUUUUUUUUUL