On August 1, 2022, a US company signed a noncancelable order to purchase inventory from a company located in Japan. The contracted price was 6,000,000 yen, payable on January 31, 2023 The machine wit be delivered to the US Company on November 1, 2022 In order to hedge against a strengthening of the yen, the U.S. Company entered into a forward exchange contract on August 1, 2022, to purchase 6,000,000 yen on January 31, 2023. The forward contract was acquired to hedge the financial component of the foreign currency firm commitment On November 1, 2022, the transaction date, the US. Company received the inventory from the Japanese company. Spot and forward exchange rates on various dates follow August 1, 2022 November 1, 2022 December 31, 2022 January 31, 2023 Required: Spot Rate ($/1yen) $.0080 $.0085 $.0083 $.0090 Forward Exchange ($/1 yen) $.0084 $.0087 $.0086 Prepare all journal entries until the arrival of the merchandise on 11/1/2018, for the U.S. Company, which pertain to the acquisition of the inventory and the forward exchange contract. Indicate the date next to each journal entry. Assume a December 31 year-end. (HINT: the answer only 4 journal entries, 1 for 8/01/2022, and 3 for 11/1/2022)

On August 1, 2022, a US company signed a noncancelable order to purchase inventory from a company located in Japan. The contracted price was 6,000,000 yen, payable on January 31, 2023 The machine wit be delivered to the US Company on November 1, 2022 In order to hedge against a strengthening of the yen, the U.S. Company entered into a forward exchange contract on August 1, 2022, to purchase 6,000,000 yen on January 31, 2023. The forward contract was acquired to hedge the financial component of the foreign currency firm commitment On November 1, 2022, the transaction date, the US. Company received the inventory from the Japanese company. Spot and forward exchange rates on various dates follow August 1, 2022 November 1, 2022 December 31, 2022 January 31, 2023 Required: Spot Rate ($/1yen) $.0080 $.0085 $.0083 $.0090 Forward Exchange ($/1 yen) $.0084 $.0087 $.0086 Prepare all journal entries until the arrival of the merchandise on 11/1/2018, for the U.S. Company, which pertain to the acquisition of the inventory and the forward exchange contract. Indicate the date next to each journal entry. Assume a December 31 year-end. (HINT: the answer only 4 journal entries, 1 for 8/01/2022, and 3 for 11/1/2022)

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter9: Operating Activities

Section: Chapter Questions

Problem 22PC

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