On October 1, 2024, Richmond Company sold inventory to a customer in a foreign country, denominated in 100,000 local currency units. Collection is expected in four months. On October 1, 2024, a forward exchange contract was acquired whereby Richmond was to pay 100,000 local currency units in fourmonths (on February 1, 2025) and receive $86,000 in U.S. dollars. The spot and forward rates for the local currency units were as follows:DateRate DescriptionExchange RateOctober 1, 2024Spot Rate$ 0.911 local currency unitDecember 31, 2024Spot Rate$ 0.931 local currency unitFebruary 1, 20251-Month Forward RateSpot Rate$ 0.881 local currency unit$ 0.941 local currency unitAny discount or premium on the forward contract is amortized using the straight-line method.Required:Assuming this is a cash flow hedge, prepare journal entries for this sales transaction and forward contract.

To record the sales transaction:February 1, 2025Accounts Receivable $86,000Sales Revenue $86,000To…

Answered: On October 1, 2024, Richmond Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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