On January 1, 2016, a U.S.firm bought a truck from a foreign firm for 10,000 FC, to be paid on March 1 in FC.The spot rate was 1 FC = $1.25 on January 1 and 1 FC = $1.265 on March 1.To protect themselves from exchange rate changes, the U.S.firm entered into a forward exchange contract on January 1 to buy FC on March 1 for $1.28.

Required:

Make all the necessary journal entries to record the transactions for the U.S.firm on January 1 and March 1.Ignore the split between spot gain/loss and time value.

Question

On January 1, 2016, a U.S.firm bought a truck from a foreign firm for 10,000 FC, to be paid on March 1 in FC.The spot rate was 1 FC = $1.25 on January 1 and 1 FC = $1.265 on March 1.To protect themselves from exchange rate changes, the U.S.firm entered into a forward exchange contract on January 1 to buy FC on March 1 for $1.28.
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Required:
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Make all the necessary journal entries to record the transactions for the U.S.firm on January 1 and March 1.Ignore the split between spot gain/loss and time value.

Quizplus · Accepted Answer

The Answer of On January 1, 2016, a U.S.firm bought a truck from a foreign firm for 10,000 FC, to be paid on March 1 in FC.The spot rate was 1 FC = $1.25 on January 1 and 1 FC = $1.265 on March 1.To protect themselves from exchange rate changes, the U.S.firm entered into a forward exchange contract on January 1 to buy FC on March 1 for $1.28.
​
Required:
​
Make all the necessary journal entries to record the transactions for the U.S.firm on January 1 and March 1.Ignore the split between spot gain/loss and time value.