On December 1, 2016, Dorn Corporation agreed to purchase a machine to be manufactured by a company in Brazil. The purchase price is 1,150,000 Brazilian reals. To hedge against fluctuations in the exchange rate, Dorn entered into a forward contract on December 1 to buy 1,150,000 reals on April 1, the agreed date of machine delivery, for $0.375 per real. The following exchange rates were quoted: Required:
Prepare journal entries necessary for Dorn during 2016 and 2017 to account for the transactions described above.

Question

On December 1, 2016, Dorn Corporation agreed to purchase a machine to be manufactured by a company in Brazil. The purchase price is 1,150,000 Brazilian reals. To hedge against fluctuations in the exchange rate, Dorn entered into a forward contract on December 1 to buy 1,150,000 reals on April 1, the agreed date of machine delivery, for $0.375 per real. The following exchange rates were quoted:  Required:
Prepare journal entries necessary for Dorn during 2016 and 2017 to account for the transactions described above.

Quizplus · Accepted Answer

The Answer of On December 1, 2016, Dorn Corporation agreed to purchase a machine to be manufactured by a company in Brazil. The purchase price is 1,150,000 Brazilian reals. To hedge against fluctuations in the exchange rate, Dorn entered into a forward contract on December 1 to buy 1,150,000 reals on April 1, the agreed date of machine delivery, for $0.375 per real. The following exchange rates were quoted:  Required:
Prepare journal entries necessary for Dorn during 2016 and 2017 to account for the transactions described above.

On December 1, 2016, Dorn Corporation Agreed to Purchase a Machine