Question
Pillar Company purchased equipment from Switzerland for 174,000 francs on December 16, 20X7, with payment due on February 14, 20X8. On December 16, 20X7, Pillar
| Pillar Company purchased equipment from Switzerland for 174,000 francs on December 16, 20X7, with payment due on February 14, 20X8. On December 16, 20X7, Pillar also acquired a 60-day forward contract to purchase francs at a forward rate of SFr 1 = $0.45. On December 31, 20X7, the forward rate for an exchange on February 14, 20X8, is SFr 1 = $0.475. The spot rates were: | |||||
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| December 16, 20X7 | 1 SFr | = | $ | 0.46 |
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| December 31, 20X7 | 1 SFr | = |
| 0.48 |
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| February 14, 20X8 | 1 SFr | = |
| 0.47 |
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Task: | |||||
| Assume that the forward contract is not designated as a hedge. | |||||
| Prepare journal entries for Pillar to record the purchase of equipment; all entries associated with the forward contract; the adjusting entries on December 31, 20X7; and entries to record the revaluations and payment on February 14, 20X8. |
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Accounting Information Systems
Authors: George H. Bodnar, William S. Hopwood
11th Edition
0132871939, 978-0132871938
