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What is the effective dollar cost of the purchase

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Question - On June 1, ACL International, a U.S. confectionery products manufacturer, purchases on account bulk chocolate from a Swiss supplier for 166,667 Swiss francs (CHF) when the spot rate is $0.90 = CHF 1. The Swiss franc payable is due on September 1. To minimize its exposure to an exchange loss should the franc appreciate relative to the dollar prior to payment, ACL International acquires a forward contract to exchange $103,334 for francs on September 1 at a forward rate of $0.92 = CHF 1.

Required: Given the following exchange rate information, provide journal entries to account for the forward exchange contract on June 1,

June 30, and September 1. The company closes its books quarterly.

June 30 spot rate $0.91 = CHF 1

September 1 spot rate $0.93 = CHF 1

What is the effective dollar cost of the Swiss chocolate purchase in Exercise 7? Show your calculations.

Reference no: EM132032702

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