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From Advanced Accounting - Fifth Edition Debra C. and Paul K. EXERCISE 12-7 Journal Entries, Income Effect, and Amount of Cash Received Lo L06 ASI
From Advanced Accounting - Fifth Edition Debra C. and Paul K.
EXERCISE 12-7 Journal Entries, Income Effect, and Amount of Cash Received Lo L06 ASI recently completed the development and installation of an accounting information system for a company located in Rio De Janeiro, Brazil. The company considered that all revenue realization criteria were satisfied and accordingly recorded on October 2, 2008, a receivable from the foreign company. The receivable is to be settled in 120 days on February 1 by the delivery of 300,000 real. To hedge against an unfavorable change in the 671 Exercises foreign exchange rate, ASI acquired a forward contract to sell 300,000 real on February 1 for S.4730 per real. The following exchange rates were quoted Forward Rate Delivery on 2/1) $.4730 Date Spot Rate $.4737 4895 4950 October 2 December 31 February 4810 ASI is a calendar-year company Kd: equire A. Prepare the journal entries to record the transactions, adjust the accounts on December 31, and settle the receivable and forward contract on February 1 B. (1) Based on the data given above, complete the following table 2008 2009 Revenue Transaction gain (loss) related to the exposed receivable balance Transaction gain (loss) related to the forward contract Effect on net income (2) what was the cumulative effect on net income (i.e., 2008 plus 2009)? (3) How much cash was received when the account was settledStep by Step Solution
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