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Prepare the journal entries made by Constellation Brands on Ju

Prepare the journal entries made by Constellation Brands on Ju

FINANCIAL ACCOUNTING
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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Hedged Forecasted Purchase Constellation Brands, a U.S. company, purchases merchandise from a German supplier on a regular basis. On April 1, 2016, Constellation purchased €10,500 for delivery on June 30, 2016, in anticipation of an expected purchase of merchandise for €10,500 at the end of June. The forward contract was a qualified hedge of a forecasted transaction. Constellation took delivery of the merchandise, settled the forward contract, and paid the German supplier €10,500 on June 30, 2016. The merchandise was subsequently sold in the U.S. on July 12, 2016, for $14,250 in cash. Relevant exchange rates ($/ €) are as follows: April 1, 2016 June 30, 2016 Spot rate $1.32 1.36 Forward rate for delivery June 30, 2016 $1.30 Prepare the journal entries made by Constellation Brands on June 30 and July 12 concerning the above events. Assume Constellation Brands is a calendar-year company, and records cost of goods sold at the time of sale.
Transcribed Image Text:Hedged Forecasted Purchase Constellation Brands, a U.S. company, purchases merchandise from a German supplier on a regular basis. On April 1, 2016, Constellation purchased €10,500 for delivery on June 30, 2016, in anticipation of an expected purchase of merchandise for €10,500 at the end of June. The forward contract was a qualified hedge of a forecasted transaction. Constellation took delivery of the merchandise, settled the forward contract, and paid the German supplier €10,500 on June 30, 2016. The merchandise was subsequently sold in the U.S. on July 12, 2016, for $14,250 in cash. Relevant exchange rates ($/ €) are as follows: April 1, 2016 June 30, 2016 Spot rate $1.32 1.36 Forward rate for delivery June 30, 2016 $1.30 Prepare the journal entries made by Constellation Brands on June 30 and July 12 concerning the above events. Assume Constellation Brands is a calendar-year company, and records cost of goods sold at the time of sale.
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