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13 33 points 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 four months (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: Exchange Rate Date Rate Description October 1, 2024 December 31, 2024 Spot Rate Spot Rate 01:24:45 February 1, 2025 1-Month Forward Rate Spot Rate $ 0.91 = 1 local currency unit $ 0.93 = 1 local currency unit $ 0.88 1 local currency unit $ 0.94 = 1 local currency unit Any 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. This question is worth 33 points. Please include all the entries for this question and explain any calculations. Thank you

13 33 points 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 four months (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: Exchange Rate Date Rate Description October 1, 2024 December 31, 2024 Spot Rate Spot Rate 01:24:45 February 1, 2025 1-Month Forward Rate Spot Rate $ 0.91 = 1 local currency unit $ 0.93 = 1 local currency unit $ 0.88 1 local currency unit $ 0.94 = 1 local currency unit Any 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. This question is worth 33 points. Please include all the entries for this question and explain any calculations. Thank you

FINANCIAL ACCOUNTING
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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13 33 points 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 four months (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: Exchange Rate Date Rate Description October 1, 2024 December 31, 2024 Spot Rate Spot Rate 01:24:45 February 1, 2025 1-Month Forward Rate Spot Rate $ 0.91 = 1 local currency unit $ 0.93 = 1 local currency unit $ 0.88 1 local currency unit $ 0.94 = 1 local currency unit Any 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. This question is worth 33 points. Please include all the entries for this question and explain any calculations. Thank you
Transcribed Image Text:13 33 points 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 four months (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: Exchange Rate Date Rate Description October 1, 2024 December 31, 2024 Spot Rate Spot Rate 01:24:45 February 1, 2025 1-Month Forward Rate Spot Rate $ 0.91 = 1 local currency unit $ 0.93 = 1 local currency unit $ 0.88 1 local currency unit $ 0.94 = 1 local currency unit Any 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. This question is worth 33 points. Please include all the entries for this question and explain any calculations. Thank you
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