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Hedged Sale Commitment and Exposed Asset Position, with Adjusting Entries On December 10, 2023, Robin Franchises, a U.S. company, received a purchase order from a U.K. customer for delivery of merchandise on January 15, 2024. The price of the merchandise is £10,000,000, payable on March 15, 2024, in pounds. To hedge its exposure to exchange rate changes, on December 10, 2023, Robin entered a forward contract for delivery of £10,000,000 to the broker on March 15, 2024. The merchandise was delivered as scheduled. On March 15, 2024, Robin received payment from the customer, and delivered the pounds to the broker to close the forward contract. Robin's accounting year ends December 31. Exchange rates ($/£) are as follows: December 10, 2023 December 31, 2023 January 15, 2024 March 15, 2024 3 Spot rate $1.4180 1.4165 1.4162 1.4160 Forward rate for delivery March 15, 2024 Show Transcribed Text $1.4167 1.4163 1.4161 Prepare the journal entries Robin Franchises made on January 15, 2024 and March 15, 2024 to record the above transactions, as well as its end-of-year adjusting entries on December 31, 2023.

Hedged Sale Commitment and Exposed Asset Position, with Adjusting Entries On December 10, 2023, Robin Franchises, a U.S. company, received a purchase order from a U.K. customer for delivery of merchandise on January 15, 2024. The price of the merchandise is £10,000,000, payable on March 15, 2024, in pounds. To hedge its exposure to exchange rate changes, on December 10, 2023, Robin entered a forward contract for delivery of £10,000,000 to the broker on March 15, 2024. The merchandise was delivered as scheduled. On March 15, 2024, Robin received payment from the customer, and delivered the pounds to the broker to close the forward contract. Robin's accounting year ends December 31. Exchange rates ($/£) are as follows: December 10, 2023 December 31, 2023 January 15, 2024 March 15, 2024 3 Spot rate $1.4180 1.4165 1.4162 1.4160 Forward rate for delivery March 15, 2024 Show Transcribed Text $1.4167 1.4163 1.4161 Prepare the journal entries Robin Franchises made on January 15, 2024 and March 15, 2024 to record the above transactions, as well as its end-of-year adjusting entries on December 31, 2023.

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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Date 12/31/23 Exchange loss Investment in forward contract To record loss on forward contract. Firm commitment 3/15/24 1/15/24 Exchange loss Exchange gain To record gain on U.S. dollar value of the firm commitment. Investment in forward contract To record loss on forward contract. Firm commitment Description J Investment in forward contract To record loss on forward contract. Foreign currency Exchange gain To record gain or loss on U.S. dollar value of the firm commitment. Accounts receivable Sales revenue To record delivery of goods to the customer. Sales revenue c Firm commitment To adjust sales revenue for the change in value of the firm commitment. Accounts receivable Exchange gain To record gain or loss on accounts receivable. Exchange loss Accounts receivable To record receipt of pounds from the U.K. customer. Cash ♦ ♦ ✓ ◆ ✓ ( << ♦ ✓ ◆ ✓ ◆ ♦ ✓ → ✓ Investment in forward contract Foreign currency To record delivery of the currency to the dealer, and settlement of the forward contract. ✓ ✓ ◆ << << ✓ Debit 2,000 x 0✓ 0x 0✓ 0x 0 ✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0 x 0✓ 0x 0✓ 0✓ Credit 0✓ 2,000 x 0✓ 0x 0✓ 0x >×< 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0 x 0x
Transcribed Image Text:Date 12/31/23 Exchange loss Investment in forward contract To record loss on forward contract. Firm commitment 3/15/24 1/15/24 Exchange loss Exchange gain To record gain on U.S. dollar value of the firm commitment. Investment in forward contract To record loss on forward contract. Firm commitment Description J Investment in forward contract To record loss on forward contract. Foreign currency Exchange gain To record gain or loss on U.S. dollar value of the firm commitment. Accounts receivable Sales revenue To record delivery of goods to the customer. Sales revenue c Firm commitment To adjust sales revenue for the change in value of the firm commitment. Accounts receivable Exchange gain To record gain or loss on accounts receivable. Exchange loss Accounts receivable To record receipt of pounds from the U.K. customer. Cash ♦ ♦ ✓ ◆ ✓ ( << ♦ ✓ ◆ ✓ ◆ ♦ ✓ → ✓ Investment in forward contract Foreign currency To record delivery of the currency to the dealer, and settlement of the forward contract. ✓ ✓ ◆ << << ✓ Debit 2,000 x 0✓ 0x 0✓ 0x 0 ✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0 x 0✓ 0x 0✓ 0✓ Credit 0✓ 2,000 x 0✓ 0x 0✓ 0x >×< 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0 x 0x
Hedged Sale Commitment and Exposed Asset Position, with Adjusting Entries On December 10, 2023, Robin Franchises, a U.S. company, received a purchase order from a U.K. customer for delivery of merchandise on January 15, 2024. The price of the merchandise is £10,000,000, payable on March 15, 2024, in pounds. To hedge its exposure to exchange rate changes, on December 10, 2023, Robin entered a forward contract for delivery of £10,000,000 to the broker on March 15, 2024. The merchandise was delivered as scheduled. On March 15, 2024, Robin received payment from the customer, and delivered the pounds to the broker to close the forward contract. Robin's accounting year ends December 31. Exchange rates ($/£) are as follows: December 10, 2023 December 31, 2023 January 15, 2024 March 15, 2024 Spot rate $1.4180 3 1.4165 1,4162 1.4160 Show Transcribed Text Date 12/31/23 Exchange loss C Forward rate for delivery March 15, 2024 Prepare the journal entries Robin Franchises made on January 15, 2024 and March 15, 2024 to record the above transactions, as well as its end-of-year adjusting entries on December 31, 2023. 1/15/24 Exchange loss Investment in forward contract To record loss on forward contract. Firm commitment $1.4167 1.4163 1.4161 Investment in forward contract To record loss on forward contract. Firm commitment Exchange gain To record gain on U.S. dollar value of the firm commitment. Description Exchange gain To record gain or loss on U.S. dollar value of the firm commitment. Accounts receivable Sales revenue To record delivery of goods to the customer. Sales revenue Investment in forward contract To record loss on forward contract. Foreign currency 3 Firm commitment To adjust sales revenue for the change in value of the firm commitment. 3/15/24 Accounts receivable Exchange gain To record gain or loss on accounts receivable. Exchange loss Accounts receivable To record receipt of pounds from the U.K. customer. Cash + ÷ + ✓ ↑ ✓ ÷ ✓ ÷ ✓ # V + ✓ + 수 ✓ ✓ ÷ ✓ + ✓ + ✓ + ✓ Investment in forward contract Foreign currency To record delivery of the currency to the dealer, and settlement of the forward contract. # ✓ → ✓ + + ✓ Debit 2,000 x 0✔ ox 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✔ 0✓ Credit 0✓ 2.000 x 0✓ 0x 0✓ 0x 0✓ 0 x 0 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0x
Transcribed Image Text:Hedged Sale Commitment and Exposed Asset Position, with Adjusting Entries On December 10, 2023, Robin Franchises, a U.S. company, received a purchase order from a U.K. customer for delivery of merchandise on January 15, 2024. The price of the merchandise is £10,000,000, payable on March 15, 2024, in pounds. To hedge its exposure to exchange rate changes, on December 10, 2023, Robin entered a forward contract for delivery of £10,000,000 to the broker on March 15, 2024. The merchandise was delivered as scheduled. On March 15, 2024, Robin received payment from the customer, and delivered the pounds to the broker to close the forward contract. Robin's accounting year ends December 31. Exchange rates ($/£) are as follows: December 10, 2023 December 31, 2023 January 15, 2024 March 15, 2024 Spot rate $1.4180 3 1.4165 1,4162 1.4160 Show Transcribed Text Date 12/31/23 Exchange loss C Forward rate for delivery March 15, 2024 Prepare the journal entries Robin Franchises made on January 15, 2024 and March 15, 2024 to record the above transactions, as well as its end-of-year adjusting entries on December 31, 2023. 1/15/24 Exchange loss Investment in forward contract To record loss on forward contract. Firm commitment $1.4167 1.4163 1.4161 Investment in forward contract To record loss on forward contract. Firm commitment Exchange gain To record gain on U.S. dollar value of the firm commitment. Description Exchange gain To record gain or loss on U.S. dollar value of the firm commitment. Accounts receivable Sales revenue To record delivery of goods to the customer. Sales revenue Investment in forward contract To record loss on forward contract. Foreign currency 3 Firm commitment To adjust sales revenue for the change in value of the firm commitment. 3/15/24 Accounts receivable Exchange gain To record gain or loss on accounts receivable. Exchange loss Accounts receivable To record receipt of pounds from the U.K. customer. Cash + ÷ + ✓ ↑ ✓ ÷ ✓ ÷ ✓ # V + ✓ + 수 ✓ ✓ ÷ ✓ + ✓ + ✓ + ✓ Investment in forward contract Foreign currency To record delivery of the currency to the dealer, and settlement of the forward contract. # ✓ → ✓ + + ✓ Debit 2,000 x 0✔ ox 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✔ 0✓ Credit 0✓ 2.000 x 0✓ 0x 0✓ 0x 0✓ 0 x 0 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0✓ 0x 0x
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