On September 1, 2021, Laguna Grill determined that it will need to purchase 100,000 kilos of tuna fish on January 31, 2022. Because of the volatile fluctuation in the price of tuna fish, on September 1, 2021, the entity negotiated a forward contract with a reputable financial institution for the entity to purchase 100,000 kilos of tuna fish on January 31, 2022, at a price of P8,000,000 or P80 per kilo. The forward contract is designated as a cash flow hedge. The market price of tuna fish per kilo is P78 on December 31, 2021, and P75 on January 31, 2022. Required: Prepare journal entries for 2021 and 2022. agavtay Company is a golf course developer that constructs approximately 5 courses each year. On July 1, 2021, the entity has agreed to buy 5,000 trees on March 1, 2022 to be planted in the courses it intends to build. To protect itself from the variability of the market price of trees, the entity entered into a forward contract with a reputable bank. The price is set at P1,500 per tree. The forward contract is designated as a cash flow hedge. If the market price on March 1, 2022 is more than P1,500, the difference is paid by the bank to the entity. On the other hand, if the market price is less than P1,500. the entity will pay the difference to the bank. The market price is P1,800 on December 31, 2021 and P1,700 on March 1, 2022. Required: Prepare journal entries for 2021 and 2022.
On September 1, 2021, Laguna Grill determined that it will need to purchase 100,000 kilos of tuna fish on January 31, 2022. Because of the volatile fluctuation in the price of tuna fish, on September 1, 2021, the entity negotiated a forward contract with a reputable financial institution for the entity to purchase 100,000 kilos of tuna fish on January 31, 2022, at a price of P8,000,000 or P80 per kilo. The forward contract is designated as a
agavtay Company is a golf course developer that constructs approximately 5 courses each year. On July 1, 2021, the entity has agreed to buy 5,000 trees on March 1, 2022 to be planted in the courses it intends to build. To protect itself from the variability of the market price of trees, the entity entered into a forward contract with a reputable bank. The price is set at P1,500 per tree. The forward contract is designated as a cash flow hedge. If the market price on March 1, 2022 is more than P1,500, the difference is paid by the bank to the entity. On the other hand, if the market price is less than P1,500. the entity will pay the difference to the bank. The market price is P1,800 on December 31, 2021 and P1,700 on March 1, 2022. Required: Prepare journal entries for 2021 and 2022.
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