4 points eBook Print References On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.40 per Norwegian krone, Derby enters into a forward contract to purchase 590,000 Norwegian kroner at a three-month forward rate of $0.45. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.441 per Norwegian krone, Derby orders and receives the merchandise, paying 590,000 kroner. The merchandise is sold within 30 days. Required: a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge. a-2. What amount should Derby Corporation report in the current year's net income as cost of goods sold? b. What amount should Derby Corporation report in the current year's net income as foreign exchange gain or loss? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B What amount should Derby Corporation report in the current year's net income as cost of goods sold? Cost of goods sold $ 260,190 < Req A1 Req B > Check

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On
March 1, when the spot rate is $0.40 per Norwegian krone, Derby enters into a forward contract to purchase 590,000 Norwegian
kroner at a three-month forward rate of $0.45. Forward points are excluded in assessing the forward contract's effectiveness as a
hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.441 per
Norwegian krone, Derby orders and receives the merchandise, paying 590,000 kroner. The merchandise is sold within 30 days.
Required:
a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge.
a-2. What amount should Derby Corporation report in the current year's net income as cost of goods sold?
b. What amount should Derby Corporation report in the current year's net income as foreign exchange gain or loss?
Complete this question by entering your answers in the tabs below.
Req A1
Req A2
Req B
What amount should Derby Corporation report in the current year's net income as cost of goods sold?
Cost of goods sold
$ 260,190
< Req A1
Req B >
Check
Transcribed Image Text:4 points eBook Print References On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.40 per Norwegian krone, Derby enters into a forward contract to purchase 590,000 Norwegian kroner at a three-month forward rate of $0.45. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.441 per Norwegian krone, Derby orders and receives the merchandise, paying 590,000 kroner. The merchandise is sold within 30 days. Required: a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge. a-2. What amount should Derby Corporation report in the current year's net income as cost of goods sold? b. What amount should Derby Corporation report in the current year's net income as foreign exchange gain or loss? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B What amount should Derby Corporation report in the current year's net income as cost of goods sold? Cost of goods sold $ 260,190 < Req A1 Req B > Check
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