Question
Merit & Family purchased engines from Canada for 34,000 Canadian dollars on March 10 with payment due on June 8. Also, on March 10, Merit
Merit & Family purchased engines from Canada for 34,000 Canadian dollars on March 10 with payment due on June 8. Also, on March 10, Merit acquired a 90-day forward contract to purchase 34,000 Canadian dollars at C$1 = $0.50. The forward contract was acquired to manage Merit & Familys exposed net liability position in Canadian dollars, but it was not designated as a hedge. The spot rates were
March 10 | C$1 | = | $ | 0.49 | |
June 8 | C$1 | = | $ | 0.52 | |
Required: Prepare journal entries for Merit & Family to record the purchase of the engines, entries associated with the forward contract, and entries for the payment of the foreign currency payable. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1 Record the foreign purchase of the engines.
2 Record the entry for the 90-day forward exchange contract signed to receive Canadian dollars.
3 Record the entry to revalue the foreign currency receivable to the current equivalent U.S. dollar value.
4 Record the entry to revalue the foreign currency accounts payable to the current U.S. dollar value.
5 Record the payment of U.S. dollars to an exchange broker for the forward contract.
6 Record the receipt of Canadian dollars from the exchange broker.
7 Record the settlement of the foreign currency payable.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started