11/1/2013 12/31/2013 1/31/2014

Spot Rate $1.20 $ $1.25 $1.30

Forward Rate $1.23 $1.26 $1.30

HedgeCo is interested in purchasing 1,000 of Product Z from OverSeas Inc. HedgeCo is very concerned about two issues: 1) that the price of Product Z will change and 2) the exchange rate will make an unfavorable change before the purchase takes place. Select a hedge and explain your selection. Use the exchange rates above to make your journal entry. Select appropriate account names for your journal entry.

I chose Cash flow! i need a reasoning for cash flow as well entries for it! (you might be able to use forward contract with cash flow not sure!)

Maximum $45

Spot Rate Forward Rate 11/1/2013 12/31/2013 1/31/2014 $1.20 $1.25 $1.30 $1.23 $1.26 $1.30 HedgeCo is interested in purchasing 1,000 of Product Z from OverSeas Inc. HedgeCo is very concerned about two issues: 1) that the price of Product Z will change and 2) the exchange rate will make an unfavorable change before the purchase takes place. Select a hedge and explain Hedge Type Cash Flow Hedge Reasoning for Selection Journal Entry Account Name DR CR Decscribe Financial Statement Effect of each account movement