Hello. Can anyone help me here in my assignment. I am just having a hard time to firgure this out. Thank you and gladly appreciate the help.
On December 1, Exotic Imports Inc, (El) ordered a large supply of product from a supplier in Athens, Greece. The currency of Greece is the Euro Dollar (EUR). The total order was EUR 375,000, payable to the supplier 30 days after delivery of the product to Ell's Warehouse in Calgary. As per the terms of the contract, title to the product would transfer to Ell Imports upon delivery to its warehouse in Calgary (scheduled for January 1). Immediately upon placing the order on December 1, Ell entered into a forwarding contract with its bank to purchase EUR 375,000 on January 31, the day that Ell expects to pay its supplier. The product was delivered as expected on January 1. Ell's controller chose to use hedge accounting for this transaction, designating the hedge as a cash flow hedge of the foreign liability. The company's year-end was December 31 Foreign exchange rates were as follows: Date December 1 December 30 January 1 January 31 Spot Rate I EUR-CAD 1.5775 I EUR-CAD 1.5944 1 EUR-CAD 1.6110 1 EUR -CAD 16500 Forward Rate 1 EUR CAD 1.6125 1 EUR -CAD 1.5985 1 EUR - CAD 1.6347 I EUR - CAD 1.6500 REQUIRED: Prepare all the journal entries required to record the cash flow hedge on the books of Exotic Imports Inc. (10 Marks) Note: Round all currency amounts to the nearest whole amount (i.e, no decimals), Carry all exchange rates to decimal places (eg. 0.1234) On December 1, Exotic Imports Inc, (El) ordered a large supply of product from a supplier in Athens, Greece. The currency of Greece is the Euro Dollar (EUR). The total order was EUR 375,000, payable to the supplier 30 days after delivery of the product to Ell's Warehouse in Calgary. As per the terms of the contract, title to the product would transfer to Ell Imports upon delivery to its warehouse in Calgary (scheduled for January 1). Immediately upon placing the order on December 1, Ell entered into a forwarding contract with its bank to purchase EUR 375,000 on January 31, the day that Ell expects to pay its supplier. The product was delivered as expected on January 1. Ell's controller chose to use hedge accounting for this transaction, designating the hedge as a cash flow hedge of the foreign liability. The company's year-end was December 31 Foreign exchange rates were as follows: Date December 1 December 30 January 1 January 31 Spot Rate I EUR-CAD 1.5775 I EUR-CAD 1.5944 1 EUR-CAD 1.6110 1 EUR -CAD 16500 Forward Rate 1 EUR CAD 1.6125 1 EUR -CAD 1.5985 1 EUR - CAD 1.6347 I EUR - CAD 1.6500 REQUIRED: Prepare all the journal entries required to record the cash flow hedge on the books of Exotic Imports Inc. (10 Marks) Note: Round all currency amounts to the nearest whole amount (i.e, no decimals), Carry all exchange rates to decimal places (eg. 0.1234)
