Hedging Foreign-Currency-Denominated Liability On March 15, 2014, Schaeffer Corporation purchased goods from a South Korean company at an invoice price of 20,000,000 won (W); payment is due on April 14, 2014. To hedge its exposed position, Schaeffer purchased W20,000,000 on March 15 for delivery on April 14 at a forward rate of $.00090/W. The spot rate was $.000905AV on March 15 and rose to $.000908/W on April 14.
Required
a. Prepare the journal entries made by Schaeffer on March 15 and April 14, 2014.
b. Calculate the cash gain or loss realized by Schaeffer by hedging compared with not hedging.