On November 1, 2023, Cheng Company (a U.S.-based company) forecasts the purchase of goods from a foreign supplier for 310,000 yuan. Cheng expects to receive the goods on April 30, 2024, and make immediate payment. On November 1, 2023, Cheng enters a six-month forward contract to buy 310,000 yuan. The company properly designates the forward contract as a cash flow hedge of a forecasted foreign currency transaction. Forward points excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis over the life of the contract. The following U.S. dollar–Yuan exchange rates apply:DateSpot RateForward Rate (to April 30, 2024)November 1, 2023$ 0.42$ 0.405December 31, 20230.410.380April 30, 20240.39N/AAs expected, Cheng receives goods from the foreign supplier on April 30, 2024, and pays 310,000 yuan immediately. Cheng sells the imported goods in the local market in May 2024.Required:Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and import purchase.What is the impact on net income in 2023?What is the impact on net income in 2024? Req APrepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and importpurchase.Req B and CNote: Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in thefirst account field.View transaction listJournal entry worksheet1Date11/01/202323Note: Enter debits before credits.Record entry45Record the forecasted sale and the six-month forward contract to buy 310,000yuan.General Journal6Clear entry78 9< Req ADebitCreditView general journalReq B and C > Req AReq B and Cb. What is the impact on net income in 2023?c. What is the impact on net income in 2024?Note: For all requirements, negative amounts should be entered with a minus sign. Do not round intermediate calculations.b. Impact on net income in 2023c. Impact on net income in 2024< Req AReq B and C>

The rate at which one country’s currency can be converted into another country’s currency referred…

Answered: On November 1, 2023, Cheng Company (a…

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	Spot Rate	Forward Rate (to April 30, 2024)
November 1, 2023	$ 0.42	$ 0.405
December 31, 2023	0.41	0.380
April 30, 2024	0.39	N/A

Required:

Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and import purchase.
What is the impact on net income in 2023?
What is the impact on net income in 2024?

Req A
Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and import
purchase.
Req B and C
Note: Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the
first account field.
View transaction list
Journal entry worksheet
1
Date
11/01/2023
2
3
Note: Enter debits before credits.
Record entry
4
5
Record the forecasted sale and the six-month forward contract to buy 310,000
yuan.
General Journal
6
Clear entry
7
8 9
< Req A
Debit
Credit
View general journal
Req B and C >

Req A
Req B and C
b. What is the impact on net income in 2023?
c. What is the impact on net income in 2024?
Note: For all requirements, negative amounts should be entered with a minus sign. Do not round intermediate calculations.
b. Impact on net income in 2023
c. Impact on net income in 2024
< Req A
Req B and C
>

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