Crane Company was incorporated in Delaware in 2017. On November 2, 2024, the controller of the company entered into a forward contract to sell 36,000 British pounds for $1.5920 on March 1, 2025. The following exchange rates were quoted on the indicated dates:

Financial Accounting Intro Concepts Meth/Uses
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ISBN:9781285595047
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Chapter13: Marketable Securities And Derivatives
Section: Chapter Questions
Problem 22E
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Crane Company was incorporated in Delaware in 2017. On November 2, 2024, the controller of the company entered into a forward
contract to sell 36,000 British pounds for $1.5920 on March 1, 2025. The following exchange rates were quoted on the indicated
dates:
Forward Rate
Spot Rate March 1 Delivery
November 2, 2024
$1.6021
1.5920
December 31, 2024
1.5820
1.58
March 1, 2025
1.6543
Crane Company's fiscal year-end is December 31.
(a)
Assume that the forward contract was entered into as a hedge against an exposed foreign currency receivable balance in the
amount of £36,000. Prepare the journal entries that would be made by Crane Company on the dates listed below. (Credit account
titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the
account titles and enter O for the amounts. Round answers to O decimal places, e.g. 5,125. List all debit entries before credit entries.)
1.
2.
November 2-to record the sale of the goods on account for £36,000 and to record the forward contract.
December 31-to adjust the accounts related to the exposed asset and forward contract at fiscal year-end.
3.
March 1-to adjust the accounts related to the exposed asset and forward contract and to record the settlement of the
receivable and delivery of the pounds to the exchange dealer.
Date
Account Titles and Explanation
Debit
Credit
Transcribed Image Text:Crane Company was incorporated in Delaware in 2017. On November 2, 2024, the controller of the company entered into a forward contract to sell 36,000 British pounds for $1.5920 on March 1, 2025. The following exchange rates were quoted on the indicated dates: Forward Rate Spot Rate March 1 Delivery November 2, 2024 $1.6021 1.5920 December 31, 2024 1.5820 1.58 March 1, 2025 1.6543 Crane Company's fiscal year-end is December 31. (a) Assume that the forward contract was entered into as a hedge against an exposed foreign currency receivable balance in the amount of £36,000. Prepare the journal entries that would be made by Crane Company on the dates listed below. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. Round answers to O decimal places, e.g. 5,125. List all debit entries before credit entries.) 1. 2. November 2-to record the sale of the goods on account for £36,000 and to record the forward contract. December 31-to adjust the accounts related to the exposed asset and forward contract at fiscal year-end. 3. March 1-to adjust the accounts related to the exposed asset and forward contract and to record the settlement of the receivable and delivery of the pounds to the exchange dealer. Date Account Titles and Explanation Debit Credit
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