On June 1 Hitch Company sold goods to a foreign customer at a price of 15,000 Foreign Currency Units Hitch will receive payment in three months on September 1st. On June 1, Hitch entered into a forward contract maturing on September 1 as a fair value hedge of its FCU receivable. Prepare all journal entries, including adjusting entries, to record the transaction and the forward contract for Hitch. Date Spot rate Forward Rate* June 1 $0.30 $0.33 June 30 $0.32 $0.32 Spet 1 $0.34 Hitch closes its books on June 30 of every year. *Forward rate is for a contract written on June 1 to mature on September 1. First, prepare entries for the sale and receivable. Then, prepare the entries for the forward contract hedge. Finally, amortize any forward premium or discount to income using OCI, other comprehensive income.
On June 1 Hitch Company sold goods to a foreign customer at a price of 15,000 Foreign Currency Units
Hitch will receive payment in three months on September 1st. On June 1, Hitch entered into a forward contract maturing on September 1 as a fair value hedge of its FCU receivable.
Prepare all
Date Spot rate Forward Rate*
June 1 $0.30 $0.33
June 30 $0.32 $0.32
Spet 1 $0.34
Hitch closes its books on June 30 of every year. *Forward rate is for a contract written on June 1 to mature on September 1.
First, prepare entries for the sale and receivable.
Then, prepare the entries for the forward contract hedge.
Finally, amortize any forward premium or discount to income using OCI, other comprehensive income.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
