Reference no: EM132898423
Problem - On November 1, 2017, US Pelican Company entered into a 90 day forward contract of $200,000 pounds to hedge a commitment to purchase special equipment on February 1, 2018 from a British firm Raven Inc. Assume Pelican uses a 12% interest rate.
The relevant exchange rates are of dollars per pound:
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Spot Rate
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Forward Rate (for Feb 1, 2018)
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November 1, 2017
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$1.32
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$1.35
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December 31, 2017
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1.47
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1.50
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February 1, 2018
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1.55
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-
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Required -
1. What journal entry did Pelican record on November 1, 2017?
2. What journal entry did Pelican record on December 31, 2017?
3. What journal entry did Pelican record on February 1, 2018 if the purchase was made?
4. If this is a forecasted transaction, what journal entry did Pelican record on November 1, 2017, on December 31, 2017, and on February 1, 2018 if the purchase was made?
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