Jon-Jan Restaurants purchased green rice, a special variety of rice, from China for 100,000 renminbi on November 1, 20X8. Payment is due on January 30, 20X9. On November 1, 20X8, the company also entered into a 90-day forward contract to purchase 100,000 renminbi. The forward contract is not designated as a hedge. The rates were as follows:

Required

Select the correct answer for each of the following questions.

1. The entry on November 1, 20X8, to record the forward contract includes a

a. Debit to Foreign Currency Receivable from Exchange Broker, 100,000 renminbi.

b. Debit to Foreign Currency Receivable from Exchange Broker, $12,600.

c. Credit to Premium on Forward Contract, $600.

d. Credit to Dollars Payable to Exchange Broker, $12,600.

2. The entries on December 31, 20X8, include a
a. Debit to Financial Expense, $300.
b. Credit to Foreign Currency Payable to Exchange Broker, $300.
c. Debit to Foreign Currency Receivable from Exchange Broker, $300.
d. Debit to Foreign Currency Receivable from Exchange Broker, $12,600.
3. The entries on January 30, 20X9, include a
a. Debit to Dollars Payable to Exchange Broker, $12,000.
b. Credit to Cash, $12,600.
c. Credit to Premium on Forward Contract, $600.
d. Credit to Foreign Currency Receivable from Exchange Broker, $12,600.
4. The entries on January 30, 20X9, include a
a. Debit to Financial Expense, $400.
b. Debit to Dollars Payable to Exchange Broker, $12,600.
c. Credit to Foreign Currency Units (renminbi), $12,600.
d. Debit to Foreign Currency Payable to Exchange Broker, $12,700.
5. The entries on January 30, 20X9, include a
a. Debit to Foreign Currency Units (renminbi), $12,700.
b. Debit to Dollars Payable to Exchange Broker, $12,700.
c. Credit to Foreign Currency Transaction Gain, $100.
d. Credit to Foreign Currency Receivable from Exchange Broker,$12,600.

Transcribed Image Text:

Date November 1, 20X8 December 31, 20X8 January 30, 20x9 Spot Rate $0.120 0.124 0.127 Forward Rate 50.126 (90 days) 0.129 (30 days)