Q9

1. Record all journal entries (show all computations) on the books of the U.S. Co. on 11/01/03, 12/31/03 (balance sheet date) and 1/30/04.
2. What would the gain or loss be if the forward contract had not been entered into. Show computation.

On November 1, 2003, a U.S. company sold merchandise to a Norwegian company for 10,000 krone. --The receivable was denominated-in-krone. On the transaction-date, the spot-rate for krone was-1 krone = $. 14. --To protect itself against a weakening of the krone, the Chicago-firm entered into a forward exchange contract to deliver-10,000 krone on January 30, 2004, the settlement date for the sale. - The 90-day forward- exchange rate specified in the contract-was-1 krone = $.139. Exchange rates on December 31, 2003 and January 30, 2004 were as follows: Spot Rate Forward Exchange + (51 krone) Rate (S/1 krone) December 31, 2003 $.135 $.133 (30-day) January 30, 2004 $.137