The following international transactions were entered into during 2013 by Sysco Corporation, the largest foodservice distributor in North America: June 15, 2013: Entered into a firm commitment to purchase frozen pasta entrees from Italy which will be resold in the United States. The invoice price was €2,400,000, and delivery and payment were to be made in 60 days. Concurrently, €2,400,000 was purchased in the forward market for delivery in 60 days at the forward rate of $0.87. The goods were received, payment was made, and the forward contract was settled on August 14, 2013, when the spot rate was $0.86. September 1, 2013: Canned products priced at 1,800,000 zloty were sold to a food distributor in Poland when the spot rate was $0.23. Payment was received on November 3, 2013, when the spot rate was $0.22, and the zloty were immediately converted to dollars. Required Prepare the 2013 journal entries made by Sysco Corporation relating to the above transactions. Sysco is a calendar year company. General Journal Date Description Debit Credit Aug.14 Answer Answer Answer Answer Answer Answer To record change in fair value of forward contract. Answer Answer Answer Answer Answer Answer To record change in cost of firm commitment, in U.S. dollar terms. Answer Answer Answer Investment in forward contract Answer Answer Answer Answer Answer To record settlement of forward purchase contract. Answer Answer Answer Answer Answer Answer To record delivery of merchandise and payment to supplier. Answer Answer Answer Answer Answer Answer To adjust inventory balance for value of firm commitment. Sep.01 Answer Answer Answer Answer Answer Answer To record sales to distributor in Poland. Nov.03 Answer Answer Answer Answer Answer Answer To record change in value of receivable. Answer Answer Answer Answer Answer Answer To record receipt of payment from customer. Answer Answer Answer Answer Answer Answer To record exchange of foreign currency for dollars.
The following international transactions were entered into during 2013 by Sysco Corporation, the largest foodservice distributor in North America: June 15, 2013: Entered into a firm commitment to purchase frozen pasta entrees from Italy which will be resold in the United States. The invoice price was €2,400,000, and delivery and payment were to be made in 60 days. Concurrently, €2,400,000 was purchased in the forward market for delivery in 60 days at the forward rate of $0.87. The goods were received, payment was made, and the forward contract was settled on August 14, 2013, when the spot rate was $0.86. September 1, 2013: Canned products priced at 1,800,000 zloty were sold to a food distributor in Poland when the spot rate was $0.23. Payment was received on November 3, 2013, when the spot rate was $0.22, and the zloty were immediately converted to dollars. Required Prepare the 2013 journal entries made by Sysco Corporation relating to the above transactions. Sysco is a calendar year company. General Journal Date Description Debit Credit Aug.14 Answer Answer Answer Answer Answer Answer To record change in fair value of forward contract. Answer Answer Answer Answer Answer Answer To record change in cost of firm commitment, in U.S. dollar terms. Answer Answer Answer Investment in forward contract Answer Answer Answer Answer Answer To record settlement of forward purchase contract. Answer Answer Answer Answer Answer Answer To record delivery of merchandise and payment to supplier. Answer Answer Answer Answer Answer Answer To adjust inventory balance for value of firm commitment. Sep.01 Answer Answer Answer Answer Answer Answer To record sales to distributor in Poland. Nov.03 Answer Answer Answer Answer Answer Answer To record change in value of receivable. Answer Answer Answer Answer Answer Answer To record receipt of payment from customer. Answer Answer Answer Answer Answer Answer To record exchange of foreign currency for dollars.
Chapter2: The Domestic And International Financial Marketplace
Section: Chapter Questions
Problem 11P
Related questions
Question
The following international transactions were entered into during 2013 by Sysco Corporation, the largest foodservice distributor in North America:
- June 15, 2013: Entered into a firm commitment to purchase frozen pasta entrees from Italy which will be resold in the United States. The invoice price was €2,400,000, and delivery and payment were to be made in 60 days. Concurrently, €2,400,000 was purchased in the forward market for delivery in 60 days at the forward rate of $0.87. The goods were received, payment was made, and the forward contract was settled on August 14, 2013, when the spot rate was $0.86.
- September 1, 2013: Canned products priced at 1,800,000 zloty were sold to a food distributor in Poland when the spot rate was $0.23. Payment was received on November 3, 2013, when the spot rate was $0.22, and the zloty were immediately converted to dollars.
Required
Prepare the 2013
General Journal | |||
---|---|---|---|
Date | Description | Debit | Credit |
Aug.14 | Answer | Answer | Answer |
Answer | Answer | Answer | |
To record change in fair value of forward contract. | |||
Answer | Answer | Answer | |
Answer | Answer | Answer | |
To record change in cost of firm commitment, in U.S. dollar terms. | |||
Answer | Answer | Answer | |
Investment in forward contract | Answer | Answer | |
Answer | Answer | Answer | |
To record settlement of forward purchase contract. | |||
Answer | Answer | Answer | |
Answer | Answer | Answer | |
To record delivery of merchandise and payment to supplier. | |||
Answer | Answer | Answer | |
Answer | Answer | Answer | |
To adjust inventory balance for value of firm commitment. | |||
Sep.01 | Answer | Answer | Answer |
Answer | Answer | Answer | |
To record sales to distributor in Poland. | |||
Nov.03 | Answer | Answer | Answer |
Answer | Answer | Answer | |
To record change in value of receivable. | |||
Answer | Answer | Answer | |
Answer | Answer | Answer | |
To record receipt of payment from customer. | |||
Answer | Answer | Answer | |
Answer | Answer | Answer | |
To record exchange of foreign currency for dollars. |
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
Step 1
Forward contract is an agreement between the buyer and the seller to sell or buy any article, commodities or the currency at a future specified date at a predetermined price.
It does not have it's own price as it depends upon the pricing of underlying asset on which the forward contract is entering into.
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