Imperial Corp., a U.S. corporation, received an order on November 1, 2013, to sell two machines to Crown Company, for 95,000 foreign currency units (FCU). The machines were to be delivered and the amount collected on March 1, 2014. In order to hedge its commitment, Imperial entered into a forward contract for 95,000 FCU delivery on March 1, 2014. The forward contract met all conditions for hedging.

Imperial Corp. has an incremental borrowing rate of 12% per year

Selected exchange rates for FCU at various dates were as follows:

November 1, 2013 - Spot rate $1.3076

Forward rate for delivery on March 1, 2014 1.2980

December 31, 2013 - Spot rate 1.3060

Forward rate for delivery on March 1, 2014 1.3150

March 1, 2014 - Spot rate 1.2972

Required:

1. Record the journal entries needed by Imperial on November 1 and December 31, 2013, and March 1, 2014. Round all entries to the nearest whole dollar (10 points)

2. Answer the following questions:

a. Indicate the amount of the discount or premium that the foreign currency was originally sold at in the foreign currency market (1 point)

b. What is the net impact on Imperial's December 31, 2013 Stockholder equity related to this transaction? (1 point)

c. What is the accumulated net impact at March 1, 2014 on Imperial's Stockholder equity related to this transaction? (1 point)

d. What would have been the net impact on Imperial's December, 31 2013 Stockholder equity related to this transaction if Imperial had not entered in the Forward Contract? (1 point)

e. What would have been the accumulated net impact on Imperial's Stockholder equity related to this transaction at March 1, 2014 if Imperial had not entered in the Forward Contract? Was Imperial better- or worst off with the derivative contract? (1 point)