Prepare the journal entries to record the transactions

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Problem - ASI recently completed the development and installation of an accounting information system for a company located in Rio De Janeiro, Brazil. The company considered that all revenue realization criteria were satisfied and accordingly recorded on October 2, 2014, a receivable from the foreign company. The receivable is to be settled in 120 days on February 1 by the delivery of 350,000 real. To hedge against an unfavorable change in the foreign exchange rate, ASI acquired a forward contract to sell 350,000 real on February 1 for $0.4730 per real. The following exchange rates were quoted:

Date

Spot Rate

Forward Rate (Delivery on 2/1)

October 2

$0.4737

$0.4730

December 31

0.4895

0.4810

February 1

0.4950

-

ASI is a calendar-year company.

Required - Prepare the journal entries to record the transactions, adjust the accounts on December 31, and settle the receivable and forward contract on February 1.

Reference no: EM132956521

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