The question relates to either Chapter 9 ( Foreign Currency Translations and Hedging Foreign Exchange Risk ) or Chapter 10 ( Translation of Foreign Currency Financial Statements ) For Advanced Accounting 13th Edition by Joe B. Hoyle, Thomas F, Schaefer, and Timothy S. Doupnik. Details are included in the image Need all calculations, journal entries, work, etc. On October 1, 2013, Jarvis Co. purchased inventory from a customer in a foreign country,denominated in 100,000 local currency units (LCU). Payment is expected in four months. On October 1,2013, a forward contract was acquired whereby Jarvis Co. was to purchase 100,000 LCU in four months(on February 1, 2014) and pay U.S. dollars. The spot and forward rates for the LCU were as follows:October 1, 2013Spot Rate$.78 = 1 LCUForward Rate$.83 = 1 LCUDecember 31, 2013Spot Rate$.81 = 1 LCUForward Rate$.86 = 1 LCUFebruary 1, 2014Spot Rate$.88 = 1 LCUThe company's borrowing rate is 12%. The present value factor for one month is .9901.(A) Prepare journal entries for this purchase transaction and forward contract. The forward contract isconsidered a cash flow hedge.(B) Compute the effect on 2013 and 2014 net income.

Foreign currency Transaction must be recorded at the rate prevailing on the date of such transaction

Answered: value factor for one month is .9901.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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The question relates to either Chapter 9 ( Foreign Currency Translations and Hedging Foreign Exchange Risk ) or Chapter 10 ( Translation of Foreign Currency Financial Statements ) For Advanced Accounting 13th Edition by Joe B. Hoyle, Thomas F, Schaefer, and Timothy S. Doupnik.

Details are included in the image
Need all calculations, journal entries, work, etc.

On October 1, 2013, Jarvis Co. purchased inventory from a customer in a foreign country,
denominated in 100,000 local currency units (LCU). Payment is expected in four months. On October 1,
2013, a forward contract was acquired whereby Jarvis Co. was to purchase 100,000 LCU in four months
(on February 1, 2014) and pay U.S. dollars. The spot and forward rates for the LCU were as follows:
October 1, 2013
Spot Rate
$.78 = 1 LCU
Forward Rate
$.83 = 1 LCU
December 31, 2013
Spot Rate
$.81 = 1 LCU
Forward Rate
$.86 = 1 LCU
February 1, 2014
Spot Rate
$.88 = 1 LCU
The company's borrowing rate is 12%. The present value factor for one month is .9901.
(A) Prepare journal entries for this purchase transaction and forward contract. The forward contract is
considered a cash flow hedge.
(B) Compute the effect on 2013 and 2014 net income.

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