Show all journal entries and memoranda

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Question - On November 1, 2020 ABC Company (ABC), the U.S. based company forecasts the purchase of goods from a foreign supplier for 100,000 yuan. ABC expects to receive the goods on April 20, 2021, and make immediate payment. On November 1, 2020, ABC enters into a six-month forward contract to buy 100,000 yuan. The company properly designates the forward contract as a cash flow hedge of a forecasted foreign currency transaction. Forward points are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis over the life of the contract. The following U.S. dollar ? Yuan exchange rates apply:

Date

Spot Rate

Forward Rate to April 30, 2021

November 1, 2020

$0.21

$0.195

December 31, 2020

$0.19

$0.170

April 30, 2021

$0.18

N/A

As expected, ABC receives the goods from the supplier on April 30, 2021 and pays 100,000 yuan immediately. ABC sells the imported goods in the local market in May 2021.

Required - Show all journal entries and memoranda related to the foreign currency forward contract, purchase, and sale from November 2020 to May 2021.

Reference no: EM132600261

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