Reference no: EM132946142
Question - On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.45 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.35. At the end of three months, the spot rate is $1.38 per euro, and Quality delivers the merchandise, collecting 400,000 euros.
What are the effects on net income from these transactions (please prepare applicable journal entries)?
On October 31, 2017, Perry Company negotiated a two-year 100,000 franc loan from a foreign bank at an interest rate of 3 percent per year. Interest payments are made annually on October 31, and the principal will be repaid on October 31, 2019. Perry prepares U.S.-dollar financial statements and has a December 31 year-end. Prepare all journal entries related to this foreign currency borrowing assuming the following:
Franc Rate October 31, 2017 $0.50
December 31, 2017 $0.55
October 31, 2018 $0.62
December 31, 2018 $0.67
October 31, 2019 $0.75