Question

Problem 1. Bell Company was incorporated in 2015 and engaged in foreign currency transactions. The following...

Problem 1. Bell Company was incorporated in 2015 and engaged in foreign currency transactions. The following exchange rates were quoted on the indicated dates:

Forward Rate

Spot Rate

March 1 Delivery

2-Nov-2017

$1.6021

$1.5920

31-Dec-2017

$1.5820

$1.5800

1-Mar-2018

$1.6543

Bell Company's fiscal year-end is December 31.

Instructions

A. Assume that on November 2, 2017 Bell recorded a sale of goods on account for £50,000 to be paid on March 1, 2018. Prepare the journal entries that would be made by Bell on November 2, December 31, and March 1 to record the sale, adjust the accounts related, and to record the receipt of the payment.

B. Assume that On November 2, 2017, Bell entered into a forward contract to sell £50,000 for $1.5920 per pound on March 1, 2018. The contract was entered into to speculate in future exchange rate fluctua­tions. Prepare the journal entries that would be made by Bell on November 2, December 31, and March 1.

C. Compute the effect of the transactions in (A) and (B) on the net income for the fis­cal years ended December 31, 2017, and December 31, 2018.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
"Forecasted" Commitment: U.S. Corporation planned on November 1, 2017 to sell two machines to International Company...
"Forecasted" Commitment: U.S. Corporation planned on November 1, 2017 to sell two machines to International Company for 750,000 foreign currency units (FCU). The machines were to be delivered and the amount collected on March 1, 2018. In order to hedge its "forecasted" transaction, U.S. entered, on November 1, 2017 , into a forward contract to sell 750,000 FCU on March 1, 2018. The forward contract met all conditions for hedging a foreign currency "forecasted" transaction. Selected exchange rates for FCU...
Brandlin Company of Anaheim, California, purchases materials from a foreign supplier on December 1, 2017, with...
Brandlin Company of Anaheim, California, purchases materials from a foreign supplier on December 1, 2017, with payment of 17,000 korunas to be made on March 1, 2018. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2017, Brandlin enters into a forward contract to purchase 17,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows: Date Spot Rate Forward Rate (to...
Board Company has a foreign subsidiary that began operations at the start of 2017 with assets...
Board Company has a foreign subsidiary that began operations at the start of 2017 with assets of 148,000 kites (the local currency unit) and liabilities of 86,000. During this initial year of operation, the subsidiary reported a profit of 42,000 kites. It distributed two dividends, each for 6,600 kites with one dividend declared on March 1 and the other on October 1. Applicable exchange rates for 1 kite follow: January 1, 2017 (start of business) $0.85 March 1, 2017 0.83...
During 2016, Thomas Company entered into two transactions involving promissory notes and properly recorded each transaction....
During 2016, Thomas Company entered into two transactions involving promissory notes and properly recorded each transaction. 1. On November 1, 2016, it purchased land at a cost of $8,000. It made a $2,000 down payment and signed a note payable agreeing to pay the $6,000 balance in 6 months plus interest at an annual rate of 10%. 2. On December 1, 2016, it accepted a $4,200, 3-month, 12% (annual interest rate) note receivable from a customer for the sale of...
b) Imperial Corp., a U.S. corporation, entered into a contract on November 1, 2013, to sell...
b) Imperial Corp., a U.S. corporation, entered into a contract on November 1, 2013, to sell two machines to Crown Company, for 95,000 foreign currency units (FCU). The machines were to be delivered and the amount collected on March 1, 2014. In order to hedge its commitment, Imperial entered into a forward contract for 95,000 FCU delivery on March 1, 2014. The forward contract met all conditions for hedging an identifiable foreign currency commitment. Selected exchange rates for FCU at...
Brandlin Company of Anaheim, California, purchases materials from a foreign supplier on December 1, 2017, with...
Brandlin Company of Anaheim, California, purchases materials from a foreign supplier on December 1, 2017, with payment of 31,000 korunas to be made on March 1, 2018. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2017, Brandlin enters into a forward contract to purchase 31,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows: Date Spot Rate Forward Rate (to...
Bushnell Company, a U.S.-based exporter of fitness equipment received an order from a Japanese customer for...
Bushnell Company, a U.S.-based exporter of fitness equipment received an order from a Japanese customer for 100 units of treadmills at a price of ￥100,000 per unit (The total export amount is ￥10,000,000). Relevant exchange rates are as follows: Date Spot rate Forward rate 12/1/2017 ￥100/$ ￥108/$ 12/31/2017 ￥110/$ ￥112/$ 1/31/2018 ￥115/$ ￥115/$ Bushnell Company prepares financial statements on December 31. Required 1. Assume Bushnell shipped the treadmills on 12/1/2017, and payment was made on 1/31/2018. On 12/1/2017, Bushnell Company...
Prepare journal entries to record the following transactions entered into by the Valente Company: (Credit account...
Prepare journal entries to record the following transactions entered into by the Valente Company: (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) 2017 June 1 Received a $10,000, 12%, 1-year note from Andrea Foley as full payment on her account. Nov. 1 Sold merchandise on account to Patton, Inc. for $12,000, terms 2/10, n/30. Nov. 5 Patton, Inc. returned merchandise worth $500. Nov. 9 Received payment in full from Patton, Inc. Dec. 31...
On August 1, 2019, Chidi Inc. ordered merchandise from a supplier in US for US$300,000 with...
On August 1, 2019, Chidi Inc. ordered merchandise from a supplier in US for US$300,000 with delivery scheduled for November 30, 2019. Payment is due on delivery. On August 2, 2019, Chidi entered a forward contract with Royal Bank to exchange currencies on November 30, 2019 at a rate of US1= $1.356. Chidi's year-end is August 31. On November 30, 2019, Chidi paid the foreign supplier in full and settled the forward contract. Exchange rates were as follows: Spot Rates...
Duck Corporation “forecasted” on December 21, 2017 to sell a machine to a company in Italy....
Duck Corporation “forecasted” on December 21, 2017 to sell a machine to a company in Italy. The selling price was 500,000 euros, to be paid on March 21, 2018. To hedge against fluctuations in the exchange rate, Duck entered into a forward contract on Dec. 21, 2017 to sell 500,000 euros on March 21, 2018, the agreed date of machine delivery, for $1.227 per euro. The company ends its fiscal year on December 31. The following exchange rates were quoted:...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT