Futura Corporation, a calendar-year corporation, is an active trader in foreign exchange, to hedge its international activities and for outright speculation. In particular, it is active in the forward market for krone (kr), the currency of Denmark. On November 1, 2016, Futura entered into the following forward contracts. The contracts were settled on January 29, 2017.

1. Sold kr2,000,000 forward to hedge a forthcoming kr2,000,000 sale to a Danish firm; the sale price and January 29, 2017 delivery date have been negotiated and the customer will pay upon delivery.

2. Purchased kr3,000,000 forward to hedge a forecasted purchase from a Danish supplier. Delivery and payment on the forecasted purchase takes place on January 29, 2017.

3. Sold kr1,000,000 forward in anticipation of a fall in the spot rate.

Relevant exchange rates (\($/kr)\) are as follows:

Required

a. Prepare the journal entries made by Futura on December 31, 2016, and January 29, 2017, regarding the above transactions.

b. Indicate how the above transactions would be disclosed on Futura’s December 31, 2016, balance sheet and 2016 income statement.

c. Comment on the specific use of the forward market by Futura.

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November 1, 2016 December 31, 2016 January 29, 2017 Spot rate.. $0.162 $0.172 $0.192 Thirty-day forward rate.. 0.145 0.165 0.185 Sixty-day forward rate 0.125 0.145 0.190 Ninety-day forward rate.. 0.105 0.132 0.195