Un November 1, 2020 ABC Company (ABC), the U.S. based company forecasts the purchase ofgoods from a foreign supplier for 100,000 yuan. ABC expects to receive the goods on April 20,2021, and make immediate payment. On November 1, 2020, ABC enters into a six-monthforward contract to buy 100,000 yuan. The company properly designates the forward contract asa cash flow hedge of a forecasted foreign currency transaction. Forward points are excluded inassessing hedge effectiveness and are amortized to net income using a straight-line method on amonthly basis over the life of the contract. The following U.S. dollar - Yuan exchange ratesapply:DateNovember 1, 2020December 31, 2020April 30, 2021Spot Rate$0.21$0.19$0.18Forward Rate to April 30,2021$0.195$0.170N/AAs expected, ABC receives the goods from the supplier on April 30, 2021 and pays 100,000yuan immediately. ABC sells the imported goods in the local market in May 2021.Required:Prepare all journal entries and memoranda related to the foreign currency forward contract,purchase, and sale from November 2020 to May 2021.

Forward Contact The implication of forward contract which can be easily overcome the risk of…

As expected, ABC receives the goods from the supplier on April 30, 2021 and pays 100,000 yuan immediately. ABC sells the imported goods in the local market in May 2021. Required: Prepare all journal entries and memoranda related to the foreign currency forward contract, purchase, and sale from November 2020 to May 2021.

As expected, ABC receives the goods from the supplier on April 30, 2021 and pays 100,000 yuan immediately. ABC sells the imported goods in the local market in May 2021. Required: Prepare all journal entries and memoranda related to the foreign currency forward contract, purchase, and sale from November 2020 to May 2021.

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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