Question
On July 1, 2021, Company A sold some limited edition art prints to B Company for 26,352,000 to be paid on January 1, 2022. The
On July 1, 2021, Company A sold some limited edition art prints to B Company for 26,352,000 to be paid on January 1, 2022. The current exchange rate on July 1, 2021, was 108=$1, so the total payment at the current exchange rate would be equal to $244,000. Company A entered into a forward contract with a large bank to guarantee the number of dollars to be received. According to the terms of the contract, if 26,352,000 is worth less than $244,000, the bank will pay A the difference in cash. Likewise, if 26,352,000 is worth more than $244,000, A must pay the bank the difference in cash.
Required:
- Prepare all necessary journal entries on Company As book at July 1, 2021.
- Prepare all necessary journal entries on Company As book at December 31, 2021, assuming that the exchange rate is 100=$1.
- Prepare all necessary journal entries on Company As book at January 1, 2022.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started