1

NAME ____________________________

ACC 545

AUTUMN, 2020

LUEDERS

ASSIGNMENT 5

A SINGLE PDF IS DUE TO BE SUBMITTED TO D2L BY 11:59PM ON TUESDAY, 10/27/20.

(40 POINTS)

PROBLEM I (20 POINTS)

On November 1, 2019, Americo, Corporation sold wine on credit to Venezia Company for 740,000.Payment is not due for 120 days.Thus, the

transaction will be settled on February 28, 2020.On November 1, 2019, Americo, Corporation also entered into a 120-day forward contract to sell

740,000.The forward contract is not designated as a hedge. The direct exchange rates were as follows:p

REQUIRED: Prepare the required information below for both the original (underlying) transaction and the related forward contract.IN ORDER TO

GET FULL CREDIT FOR YOUR ANSWERS, PLEASE BE SURE TO CLEARLY SHOW ALL OF YOUR WORK.

JOURNAL ENTRIES AT NOVEMBER 1, 2019 (TRANSACTION DATE):

Foreign Currency Transaction Forward Contract

DECEMBER 31, 2019 (YEAR-END):

JOURNAL ENTRIES:

Foreign Currency Transaction Forward Contract

FINANCIAL STATEMENT PRESENTATION

INCOME STATEMENT BALANCE SHEET

JOURNAL ENTRIES AT FEBRUARY 28, 2020 (SETTLEMENT DATE):

Foreign Currency Transaction Forward Contract

SPOT FORWARD

11/1/2019 $ 1.12 $ 1.16 (120 days)

12/31/2019 $ 1.18 $ 1.14 (60 days)

2/28/2020 $ 1.13

2

PROBLEM II (20 POINTS)

On November 1, 2019, Americo, Corporation purchased wine on credit from Venezia Company for 740,000.Payment is not due for 120 days.

Thus, the transaction will be settled on February 28, 2020.On November 1, 2019, Americo, Corporation also entered into a 120-day forward

contract to purchase 740,000. The forward contract is not designated as a hedge. The direct exchange rates were as follows:

REQUIRED: Prepare the required information below for both the original (underlying) transaction and the related forward contract.BE SURE TO

CLEARLY SHOW ALL OF YOUR WORK.

JOURNAL ENTRIES AT NOVEMBER 1, 2019 (TRANSACTION DATE):

Foreign Currency Transaction Forward Contract

DECEMBER 31, 2019 (YEAR-END):

JOURNAL ENTRIES:

Foreign Currency Transaction Forward Contract

FINANCIAL STATEMENT PRESENTATION

INCOME STATEMENT BALANCE SHEET

JOURNAL ENTRIES AT FEBRUARY 28, 2020 (SETTLEMENT DATE):

Foreign Currency Transaction Forward Contract

SPOT FORWARD

11/1/2019 $ 1.12 $ 1.16 (120 days)

12/31/2019 $ 1.18 $ 1.14 (60 days)

2/28/2020 $ 1.13