Maloney Corporation has decided to speculate on the foreign exchange market, and has entered into a 6-month forward contract to sell 250,000 Mexican pesos. When the forward contract was acquired on October 1, 2012, the spot rate for the peso was $0.1601 and the 6-month future was $0.1639. On December 31, 2012, the spot rate was $0.1616 and the future rate was $0.1607. On April 1, 2013, the spot rate was $0.1650. Spot Rate Forward Rate 10/1/12 0.1601 0.1639 12/31/12 0.1616 0.1607 4/1/13 0.1650 Prepare the necessary journal entries to record the forward contract Journal Calculate the total gain or loss on the speculative hedge
Maloney Corporation has decided to speculate on the foreign exchange market, and has entered into a 6-month forward contract to sell 250,000 Mexican pesos. When the forward contract was acquired on October 1, 2012, the spot rate for the peso was $0.1601 and the 6-month future was $0.1639. On December 31, 2012, the spot rate was $0.1616 and the future rate was $0.1607. On April 1, 2013, the spot rate was $0.1650.
Spot Rate Forward Rate
10/1/12 0.1601 0.1639
12/31/12 0.1616 0.1607
4/1/13 0.1650
- Prepare the necessary
journal entries to record the forward contract
|
Journal |
|||
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Calculate the total gain or loss on the speculative hedge
Step by step
Solved in 3 steps
