Question
6) Barnes Company entered into a forward contract during the current year to hedge the risk of a material supply cost increase. Based on the
6) Barnes Company entered into a forward contract during the current year to hedge the risk of a material supply cost increase. Based on the current market, at year-end the present value of the estimated amount they will have to pay in ten months is $750,000. What entry would be recorded at year-end closing, assuming that no amount was recorded for this contract until this time?
A)
Forward Contract (+A) $750,000
Other Comprehensive Income (+SE) $750,000
B)
Forward Contract (+A) $750,000
Earnings (+SE) $750,000
C)
Other Comprehensive Income (-SE) $750,000
Earnings (+SE) $750,000
D)
Other Comprehensive Income (-SE) $750,000
Forward Contract (+L) $750,000
Could you explain why choose D?
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Fundamentals Of Advanced Accounting
Authors: Joe Hoyle
4th Edition
78136636, 978-0078136634
