Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On December 1 , 2 0 X 1 , Micro World Incorporation entered Into a 1 2 0 - day forward contract to sell 1

image text in transcribed
On December 1,20X1, Micro World Incorporation entered Into a 120-day forward contract to sell 100,000 Australian dollars (A$). Micro World's fiscal year ends on December 31. The direct exchange rates follow.
\table[[Date,Spot Rate,\table[[Forward Rate for],[March 31,26\times 2]]],[December 1,20\times 1,$0.600,$0.609],[December 31,20\times 1,0.610,0.612],[January 30,28\times 2,0.608,0.605],[March 31,26\times 2,0.602,]]
Required:
Prepare all Journal entrles for Micro World Incorporated for the following Indepenclent s/tuations:
The forward contract was to manage the forelgn currency risks from the sale of furniture for A$100,000 on December 1,20X1, with payment due on March 31,20x2 The forward contract is not designated as a hedge.
The forward contract was to hedge an anticlpated sale of furniture on January 30. The sale took place on January 30 with payment due on March 31,20X2. The derivative is designated as a cash flow hedge. The company uses the forward exchange rate to measure hedge effectlveness.
The forward contract was for speculatlve purposes only.
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required 1
The forward contract was to manage the foreign currency risks from the sale of furniture for A$100,000 on December 1,20X1, with payment due on March 31,20X2. The forward contract is not designated as a hedge.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
\table[[No,Date,General Journal,,Debit,Cr],[1,December 1,20\times 1,Accounts receivable (A$),o.,60,000,],[,Sales,0,,6C],[2,December 1,20\times 1,Dollars receivable from exchange broker ($),0,60,900,],[,Foreign currency payable to exchange broker (AS),0,,80],[3,December 31,20x1,Foreign currency transaction loss,\theta ,1,0000,],[,Accounts payable (A$),\theta ,,1],[4,December 31,20x1,Foreign currency transaction loss,\theta ,3000,],[,Foreign currency payable to exchange broker (AS),0,,],[5,January 30,20\times 2,No journal entry required,o.,,],[6,March 31,20\times 2,Foreign currency transaction loss,ox,1,0000,],[,Foreign currency units (A$),\Theta ,,T],[7,March 31,20\times 2,Accounts payable (A$),\Theta ,8000,],[,Foreign currency transaction gain,\Theta ,,]]
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac

14th edition

1337270598, 978-1337270595

More Books

Students also viewed these Accounting questions

Question

2. What is the difference between list price and net price?

Answered: 1 week ago