Question
1/ On January 1, 2021, a U.S. firm sold equipment to a foreign firm for 50,000 FC, to be received on March 1 in FC.
1/ On January 1, 2021, a U.S. firm sold equipment to a foreign firm for 50,000 FC, to be received on March 1 in FC. The spot rate was 1 FC = $1.50 on January 1 and 1 FC = $1.65 on March 1. To protect themselves from exchange rate changes, the U.S. firm entered into a forward exchange contract on January 1 to sell FC on March 1 for $1.52. The adjusting entry on 1.3.2021 includes:
a.
Credit to exchange losses $6,500.
b.
Debit to exchange gains $6,500.
c.
Debit to loss on contract $6,500.
d.
Credit to gains on contract $6,500 2/
On January 1, 2021, a U.S. firm purchased equipment from a foreign firm for 50,000 FC, to be paid on March 1 in FC. The spot rate was 1 FC = $1.50 on January 1 and 1 FC = $1.65 on March 1. To protect themselves from exchange rate changes, the U.S. firm entered into a forward exchange contract on January 1 to buy FC on March 1 for $1.52. The journal entry for purchasing the foreign currency on 1.3.2021 includes:
a.
Cash to be debited.
b.
Foreign currency to be debited.
c.
Accounts payable to be debited.
d.
Foreign currency to be credited
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