On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 180,000 FCUS with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 180,000 FCUS. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply: Forward Rate (to April 30, 2018) $ 0.28 0.25 N/A Date Spot Rate November 1, 2017 December 31, 2017 April 30, 2018 $0.29 0.27 0.26 Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610. a. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract. b. What is the impact on net income in 2017? c. What is the impact on net income in 2018?
On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 180,000 FCUS with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 180,000 FCUS. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply: Forward Rate (to April 30, 2018) $ 0.28 0.25 N/A Date Spot Rate November 1, 2017 December 31, 2017 April 30, 2018 $0.29 0.27 0.26 Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610. a. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract. b. What is the impact on net income in 2017? c. What is the impact on net income in 2018?
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter13: Marketable Securities And Derivatives
Section: Chapter Questions
Problem 21E
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you