On November 1, 2013, Stateside Company (a U.S. manufacturer) sold an airplane for 1 million New Zealand dollars (NZ$) to New Zealand company Aukland Corporation. Stateside will receive payment on January 30, 2014 in New Zealand dollars. In order to hedge the accounts receivable position, Stateside entered into a 90-day forward contract to sell 1 million New Zealand dollars on January 30, 2014. On November 1, 2013, the 90-day forward rate is US$0.73 per New Zealand dollar. The forward contract will be settled net. Account for the hedge as a fair value hedge. Ignore the time value of money.
The relevant exchange rates per New Zealand dollar:
Required:
Record the journal entries that Stateside would need to prepare at November 1, 2013, December 31, 2013 and January 30, 2014. December 31, 2013 is the fiscal year end.

Question

On November 1, 2013, Stateside Company (a U.S. manufacturer) sold an airplane for 1 million New Zealand dollars (NZ$) to New Zealand company Aukland Corporation. Stateside will receive payment on January 30, 2014 in New Zealand dollars. In order to hedge the accounts receivable position, Stateside entered into a 90-day forward contract to sell 1 million New Zealand dollars on January 30, 2014. On November 1, 2013, the 90-day forward rate is US$0.73 per New Zealand dollar. The forward contract will be settled net. Account for the hedge as a fair value hedge. Ignore the time value of money.
The relevant exchange rates per New Zealand dollar:
  Required:
Record the journal entries that Stateside would need to prepare at November 1, 2013, December 31, 2013 and January 30, 2014. December 31, 2013 is the fiscal year end.

Quizplus · Accepted Answer

The Answer of On November 1, 2013, Stateside Company (a U.S. manufacturer) sold an airplane for 1 million New Zealand dollars (NZ$) to New Zealand company Aukland Corporation. Stateside will receive payment on January 30, 2014 in New Zealand dollars. In order to hedge the accounts receivable position, Stateside entered into a 90-day forward contract to sell 1 million New Zealand dollars on January 30, 2014. On November 1, 2013, the 90-day forward rate is US$0.73 per New Zealand dollar. The forward contract will be settled net. Account for the hedge as a fair value hedge. Ignore the time value of money.
The relevant exchange rates per New Zealand dollar:
  Required:
Record the journal entries that Stateside would need to prepare at November 1, 2013, December 31, 2013 and January 30, 2014. December 31, 2013 is the fiscal year end.

On November 1, 2013, Stateside Company (A U