Question
Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month
Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 264,000 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.
Record the purchase of 1,200 cases of Oktoberfest-style beer from a German supplier.
Record entry for the forward contract entered into.
Record the entry to adjust the value of the euros to the new spot rate.
Adjust the forward contract to fair value.
To record a foreign exchange loss on the forward contract to offset the foreign exchange gain on the accounts payable.
Record the foreign exchange loss for the third quarter.
Record the entry for gain or loss on the forward contract on the payment date when the spot exchange rate is $1.18 per Euro.
Record the change in the fair value of the forward contract on October 15 when the spot rate is $1.18 per Euro.
To record a foreign exchange loss on the forward contract to offset the foreign exchange gain on the accounts payable.
Record the foreign exchange loss for the fourth quarter.
Record purchase of foreign currency to make payment to German supplier.
Record payment made to German supplier on October 15 when the spot rate is $1.18 per Euro.
Record the transfer of inventory to cost of goods sold.
Pacifico Company, a U.S.-based importer of beer and wine, purchased 1,200 cases of Oktoberfest-style beer from a German supplier for 264,000 euros. Relevant U.S. dollar exchange rates for the euro are as follows: The company closes its books and prepares third-quarter financial statements on September 30
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