On October 1, 2024, Sunland Corporation ordered some equipment from a supplier for 303,000 euros. Delivery and payment are to occur on November 15. 2024. The spot rates on October 1 and November 15, 2024, are $1.20 and $1.30, respectively. (a) Assume that Sunland entered into a forward contract on October 1, 2024, to hedge the firm commitment. The forward rates for euros for November 15 delivery were October 1 November 15 $1.23 $1.30 Furthermore, assume the equipment was purchased and paid for on November 15. Prepare all journal entries needed to record and settle the hedge and to record the purchase of the equipment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry for the account titles and enter O for the amounts. List all debit entries before credit entries.)

On October 1, 2024, Sunland Corporation ordered some equipment from a supplier for 303,000 euros. Delivery and payment are to occur on November 15. 2024. The spot rates on October 1 and November 15, 2024, are $1.20 and $1.30, respectively. (a) Assume that Sunland entered into a forward contract on October 1, 2024, to hedge the firm commitment. The forward rates for euros for November 15 delivery were October 1 November 15 $1.23 $1.30 Furthermore, assume the equipment was purchased and paid for on November 15. Prepare all journal entries needed to record and settle the hedge and to record the purchase of the equipment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry for the account titles and enter O for the amounts. List all debit entries before credit entries.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Date Account Titles and Explanation Debit Credit (To record gain or loss on foreign currency) (To record gain or loss on firm commitment) (To record payment to exchange dealer and receipt of foreign currency) (To record settlement of firm commitment)

(b)
If the forward contract was not acquired, record the journal entry to purchase the equipment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and
enter o for the amounts. List debit entry before credit entry.)
Account Titles and Explanation
Debit
Credit

On October 1, 2024, Sunland Corporation ordered some equipment from a supplier for 303,000 euros. Delivery and payment are to occur on November 15, 2024. The spot rates on October 1 and November 15, 2024, are $1.20 and $1.30, respectively.
(a)
Assume that Sunland entered into a forward contract on October 1, 2024, to hedge the firm commitment. The forward rates for euros for November 15 delivery were
October 1
November 15
$1.23
$1.30
Furthermore, assume the equipment was purchased and paid for on November 15. Prepare all journal entries needed to record and settle the hedge and to record the purchase of the equipment. (Credit account titles are automatically indented when the
amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)

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