Question
Need the answer asap Thank you 3A) Please answer 3a,b,c&d using the case given below. On June 1, Year 3, STL Corp. (STLC) ordered merchandise
Need the answer asap
Thank you
3A) Please answer 3a,b,c&d using the case given below.
On June 1, Year 3, STL Corp. (STLC) ordered merchandise from a supplier in Turkey for Turkish lira (TL) 209,000. The goods were delivered on September 30, with terms requiring cash on delivery. On June 2, Year 3, STLC entered a forward contract as a cash flow hedge to purchase TL 209,000 on September 30, Year 3, at a rate of $0.82. STLCs year-end is June 30.
On September 30, Year 3, STLC paid the foreign supplier in full and settled the forward contract.
Exchange rates were as follows:
| Spot Rates | Forward Rates* |
June 1 and 2, Year 3 | TL1 = $0.790 | TL1 = $0.820 |
June 30, Year 3 | TL1 = $0.780 | TL1 = $0.815 |
September 30, Year 3 | TL1 = $0.830 | TL1 = $0.830 |
*For contracts expiring on September 30, Year 3.
3a) Which journal entry under the assumption that no forward contract was entered would be correct?
1. | Sep 30, Year 3 DR Inventory 171,380 CR Cash 171,380 | |
2. | June 30, Year 3 DR Inventory 173,470 CR Commitment liability 173,470 | |
3. | Sep 30, Year 3 DR Inventory 173,470 CR Cash 173,470 | |
4. | June 1, Year 3 DR Inventory 165,110 CR Cash 165,110 |
3C) Please use case 3a to answer the following.
3c) Prepare all journal entries necessary for STLC assuming in case 3a, it entered into a forward contract using casflow hedge.
3D) Please refer to case 3a to answer the following.
3d) Prepare all necessary journal entries to record the transactions described in case 3a, assuming that the forward contract was designated as a fair value hedge.
Provide all details to journals with date, name of journal and amount. Show all your work such as computations as well.
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