Question
On October 1, Year 6, Versatile Company contracted to sell merchandise to a customer in Switzerland at a selling price of CHF476,000. The contract called
On October 1, Year 6, Versatile Company contracted to sell merchandise to a customer in Switzerland at a selling price of CHF476,000. The contract called for the merchandise to be delivered to the customer on January 31, Year 7, with payment due on delivery. On October 1, Year 6, Versatile arranged a forward contract to deliver CHF476,000 on January 31, Year 7, at a rate of CHF1 = $1.09. Versatiles year-end is December 31. The merchandise was delivered on January 31, Year 7, and CHF476,000 were received and delivered to the bank. Exchange rates were as follows: Spot Rates Forward Rates** October 1, Year 6 CHF1 = $1.07 CHF1 = $1.09 December 31, Year 6 CHF1 = $1.10 CHF1 = $1.11 January 31, Year 7 CHF1 = $1.08 CHF1 = $1.08 **For contracts expiring on January 31, Year 7. Required: (a) Prepare the journal entries (using net method) that Versatile should make to record the events described assuming that the forward contract is designated as a cash flow hedge. (In cases where no entry is required, please select the option "No journal entry required" for your answer to grade correctly. Leave no cells blank - be certain to enter "0" wherever required.) Date General Journal Debit Credit October 1, Year 6 (Click to select) (Click to select) Record the forward contract. December 31, Year 6 (Click to select) (Click to select) Record the adjustment of forward contract to forward rate. January 31, Year 7 (Click to select) (Click to select) Record the sales. (Click to select) (Click to select) Record the adjustment of forward contract to forward rate. (Click to select) (Click to select) Record the adjustment of other comprehensive income. (Click to select) (Click to select) (Click to select) Record the forward contract with bank. (b) Prepare a partial trial balance of the accounts used as at December 31, Year 6. (Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response.) Partial trial balance December 31, Year 6 Account Debit Credit (Click to select) $ $ (Click to select) $ $
On October 1, Year 6, Versatile Company contracted to sell merchandise to a customer in Switzerland at a selling price of CHF476,000. The contract called for the merchandise to be delivered to the customer on January 31, Year 7, with payment due on delivery. On October 1, Year 6, Versatile arranged a forward contract to deliver CHF476,000 on January 31, Year 7, at a rate of CHF1 = $1.09. Versatile's year-end is December 31. The merchandise was delivered on January 31, Year 7, and CHF476,000 were received and delivered to the bank. Exchange rates were as follows: October 1, Year 6 December 31, Year 6 January 31, Year 7 Spot Rates CHF1 = $1.87 CHF1 = $1.10 CHF1 = $1.88 Forward Rates** CHF1 = $1.89 CHF1 = $1.11 CHF1 = $1.88 **For contracts expiring on January 31, Year 7 Required: (a) Prepare the journal entries (using net method) that Versatile should make to record the events described assuming that the forward contract is designated as a cash flow hedge. (In cases where no entry is required, please select the option "No journal entry required" for your answer to grade correctly. Leave no cells blank - be certain to enter "0" wherever required.) Debit Credit Date October 1, Year 6 General Journal (Click to select) (Click to select) Record the forward contract. December 31, Year 6 (Click to select) (Click to select) Record the adjustment of forward contract to forward rate. (a) Prepare the journal entries (using net method) that Versatile should make to record the events described assuming that the forward contract is designated as a cash flow hedge. (In cases where no entry is required, please select the option "No journal entry required" for your answer to grade correctly. Leave no cells blank - be certain to enter "0" wherever required.) Debit Credit Date October 1, Year 6 General Journal (Click to select) (Click to select) Record the forward contract. December 31, Year 6 (Click to select) (Click to select) Record the adjustment of forward contract to forward rate. January 31, Year 7 (Click to select) (Click to select) Record the sales. (Click to select) (Click to select) Record the adjustment of forward contract to forward rate. (Click to select) (Click to select) Record the adjustment of other comprehensive income. (Click to select) (Click to select) (Click to select) Record the forward contract with bank. (b) Prepare a partial trial balance of the accounts used as at December 31, Year 6. (Leave no cells blank - be certain to enter "O" wherever required. Omit $ sign in your response.) Partial trial balance December 31, Year 6 Debit $ Account Credit (Click to select) (Click to select) $ $ $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