On April 1, Anthes Corporation, a calendar-year U.S. electronics manufacturer, invests 30 million yen in a three-month

Question:

On April 1, Anthes Corporation, a calendar-year U.S. electronics manufacturer, invests 30 million yen in a three-month yen-denominated CD with a fixed coupon of 8 percent. To hedge against the depreciation of the yen prior to maturity, Anthes designates its accounts payable due to the Sando Company as a hedge. Anthes Corporation. purchased 32.5 million yen worth of computer chips on account paying 10 percent down, the balance to be paid in three months. Interest at 8 percent per annum is payable on the unpaid foreign currency balance. The U.S. dollar/Japanese yen exchange rate on April 1 was $1.00 = \100; on July 1 it was $ 1.00 = \90.

Required:

Prepare dated journal entries in U.S. dollars to record the incurrence and settlement of this foreign currency transaction assuming that the hedge is deemed highly effective in reducing Alexaa’s FX risk.

Accounts Payable
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