Question
On October 1, year 1, butterworth company entered into a forward contract to sell 100,000 rupee in four months(on January 31, Year 2). Relevant exchange
On October 1, year 1, butterworth company entered into a forward contract to sell 100,000 rupee in four months(on January 31, Year 2). Relevant exchange rates for the rupee are as follows:
Butterworth Companys incremental borrowing rate is 12 percent. The present value factor for one month at an annual interest rate of 12 percent (1 percent per month) is 0.9901. Butterworth must close its books and prepare financial statements on December 31.
A. Prepare journal entries assuming the forward contract was entered into as a fair value hedge of 100,00-rupee receivable arising from a sale made on October 1, year 1. Include entries for both the sale and the forward contract.
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