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On October 1 2013 . Jarvis Co . sold inventory to a customer in a foreign country denominated in 10 000 local currency units ICU
On October 1 2013 . Jarvis Co . sold inventory to a customer in a foreign country denominated in 10 000 local currency units ICU ) . Collection is expected in four months . On October 1 2013 , a forward exchange contract was acquired whereby Jarvis Co was to pay 100 000 ICU in four months ( on February 1 2014 ) and receive $78000 in U .S dollars . The spot and forward rates for the ICU were as follows Date Rate Description Exchange Rate October 1 . 2013 Spot Rate $83- 1LOU December 31 , 2013 Spot Rate 5.85 - 1 LOU 1 - Month Forward Rate 9.80 = 1 LOU February 1 . 2014 Spot Rate 8 86 = 1LOU The company's borrowing rate is 129% The present value factor for one month is 9901 Any discount or premium on the contract is amortized using the straight - line method Assuming this is a cash flow hedge prepare journal entries for this sales transaction and forward contract
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