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Assume that the beer arrived on August 1 5 , and the company made payment on Dctober 1 5 . On August 1 5 ,
Assume that the beer arrived on August and the company made payment on Dctober On August the
company entered into a twomonth forward contract to purchase euros. The company designated the forward
contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge
effectiveness and amortized to net income using a straight line method on a monthly basis. Prepare journal entries to
account for the import purchase and foreign currency forward contract.
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Assume that the company ordered the beer on August The beer arrived and the company paid for it on Dotober
Dn August the company entered into a twomonth forward contract to purchase euros. The company designated
the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is
measured by referring to changes in the forward rate. Forward points are not excluded in assessing hedge effectiveness.
Prepare journal entries to account for the foreign currency forward contract, foreign currency firm commitment, and import
purchase. Assume that the company ordered the beer on August The beer arrived and the company paid for it on Detober
On August the company purchased a twomonth call option on euros. The company designated the option as a
fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to
changes in the spot rate. The time value of the option is excluded from the assessment of hedge effectiveness, and the
change in time value is recognized in net income over the life of the option. Prepare journal entries to account for the
foreign currency option, foreign currency firm commitment, and import purchase.Assume that on August the company forecasted the purchase of beer on Dctober On August the company
acquired a twomonth call option on euros. The company designated the option as a cash value hedge of a
forecasted foreign currency transaction. The time value of the option is excluded from the assessment of hedge
effectiveness, and the change in time value is recognized in net income over the life of the option. Prepare journal entries
to account for the foreign currency option and import purchase.
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Acme Corporation, a USbased importer of beer and wine, purchased cases of Oktoberfeststyle beer from Coyote for euros before
purchasing the company. Relevant US dollar exchange rates for the euro are as follows:
The company closes its books and prepares thirdquarter financial statements on September
Assume that the beer arrived on August and the company made payment on October There was no attempt to hedge the exposure to
foreign exchange risk. Prepare journal entries to account for this import purchase.
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