"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 at various dates were as follows:
Date | Spot Rate | Forward Rate (Delivery on 3/1/2018) |
11/1/2017 | $0.9540 | $0.9535 |
12/31/2017 | $0.9452 | $0.9515 |
3/1/2018 | $0.9626 |
Required: Prepare all journal entries relative to the above on the following dates:
1. November 1, 2017.
2. Year-end adjustments on December 31, 2017.
3. March 1, 2018. (Include all adjustments related to the forward contract)
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