Purchase with Forward Exchange Contract Merit&Family purchased engines from Canada for 30,000 Canadian dollars on March 10, with payment due on June 8. Also, on March 10, Merit acquired a 90-day forward contract to purchase 30,000 Canadian dollars at C$1 = $0.58. The forward contract was acquired to manage Merit&Family’s exposed net liability position in Canadian dollars, but it was not designated as a hedge. The spot rates were
March 10 | C$1 = $ | 0.57 |
June 8 | C$1 = $ | 0.60 |
Required
Prepare journal entries for Merit&Family to record the purchase of the engines, entries associated with the forward contract, and entries for the payment of the foreign currency payable.
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