Homework Help is Here – Start Your Trial Now!
Business
Accounting
Hedged Forecasted Revenue with Adjusting Entry McDonald's Corporation forecasts that it will receive £5,000,000 in franchise revenues in 6 months. To lock in the dollar value of these revenues, on October 10, 2019, it enters a forward sale contract to deliver £5,000,000 to a broker at a rate of $1.324/E on April 10, 2020. On April 10, 2020, McDonald's receives £5,000,000 in payment from the franchisees, records the revenue as earned, and sells the currency using the forward contract. McDonald's Corporation's accounting year ends December 31. Relevant exchange rates are: October 10, 2019 December 31, 2019 April 10, 2020 Required Spot rate $1.325 1.322 1.319 Forward rate for delivery April 10, 2020 $1.324 1.320 Prepare the journal entries made by McDonald's in 2019 and 2020, including its December 31, 2019, adjusting entries. Date 12/31/19 Investment in forward contract Description To record increase in fair value of forward sale contract. 04/10/20 Investment in forward contract To record increase in fair value of forward sale contr To record franchise revenue. # Foreign currency To record delivery of currency and receipt of U.S. dollars. " To release forward contract gains or losses from OCI to income. Debit 0 0 0 0 0 0 0 0 0 0 Credit 0 0 0 0 0 0 0 0 000 0

Hedged Forecasted Revenue with Adjusting Entry McDonald's Corporation forecasts that it will receive £5,000,000 in franchise revenues in 6 months. To lock in the dollar value of these revenues, on October 10, 2019, it enters a forward sale contract to deliver £5,000,000 to a broker at a rate of $1.324/E on April 10, 2020. On April 10, 2020, McDonald's receives £5,000,000 in payment from the franchisees, records the revenue as earned, and sells the currency using the forward contract. McDonald's Corporation's accounting year ends December 31. Relevant exchange rates are: October 10, 2019 December 31, 2019 April 10, 2020 Required Spot rate $1.325 1.322 1.319 Forward rate for delivery April 10, 2020 $1.324 1.320 Prepare the journal entries made by McDonald's in 2019 and 2020, including its December 31, 2019, adjusting entries. Date 12/31/19 Investment in forward contract Description To record increase in fair value of forward sale contract. 04/10/20 Investment in forward contract To record increase in fair value of forward sale contr To record franchise revenue. # Foreign currency To record delivery of currency and receipt of U.S. dollars. " To release forward contract gains or losses from OCI to income. Debit 0 0 0 0 0 0 0 0 0 0 Credit 0 0 0 0 0 0 0 0 000 0

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter16: Financial Planning And Forecasting
Section: Chapter Questions
Problem 8P: LONG-TERM FINANCING NEEDED At year-end 2019, total assets for Arrington Inc. were 1.8 million and...
See similar textbooks
icon
Related questions
Question
Hedged Forecasted Revenue with Adjusting Entry McDonald's Corporation forecasts that it will receive £5,000,000 in franchise revenues in 6 months. To lock in the dollar value of these revenues, on October 10, 2019, it enters a forward sale contract to deliver £5,000,000 to a broker at a rate of $1.324/E on April 10, 2020. On April 10, 2020, McDonald's receives £5,000,000 in payment from the franchisees, records the revenue as earned, and sells the currency using the forward contract. McDonald's Corporation's accounting year ends December 31. Relevant exchange rates are: October 10, 2019 December 31, 2019 April 10, 2020 Required Spot rate $1.325 1.322 1.319 Forward rate for delivery April 10, 2020 $1.324 1.320 Prepare the journal entries made by McDonald's in 2019 and 2020, including its December 31, 2019, adjusting entries. Date 12/31/19 Investment in forward contract Description To record increase in fair value of forward sale contract. 04/10/20 Investment in forward contract To record increase in fair value of forward sale contr To record franchise revenue, 46 Foreign currency To record delivery of currency and receipt of U.S. dollars. 4) AP " 4 41 To release forward contract gains or losses from OCI to income. ( Debit 0 0 0 0 0 0 0 0 0 Credit 0 0 0 0 0 0 00 0 0 0
Transcribed Image Text:Hedged Forecasted Revenue with Adjusting Entry McDonald's Corporation forecasts that it will receive £5,000,000 in franchise revenues in 6 months. To lock in the dollar value of these revenues, on October 10, 2019, it enters a forward sale contract to deliver £5,000,000 to a broker at a rate of $1.324/E on April 10, 2020. On April 10, 2020, McDonald's receives £5,000,000 in payment from the franchisees, records the revenue as earned, and sells the currency using the forward contract. McDonald's Corporation's accounting year ends December 31. Relevant exchange rates are: October 10, 2019 December 31, 2019 April 10, 2020 Required Spot rate $1.325 1.322 1.319 Forward rate for delivery April 10, 2020 $1.324 1.320 Prepare the journal entries made by McDonald's in 2019 and 2020, including its December 31, 2019, adjusting entries. Date 12/31/19 Investment in forward contract Description To record increase in fair value of forward sale contract. 04/10/20 Investment in forward contract To record increase in fair value of forward sale contr To record franchise revenue, 46 Foreign currency To record delivery of currency and receipt of U.S. dollars. 4) AP " 4 41 To release forward contract gains or losses from OCI to income. ( Debit 0 0 0 0 0 0 0 0 0 Credit 0 0 0 0 0 0 00 0 0 0
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Fundamentals Of Financial Management, Concise Edi…
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS