70.2K

Verified Solution

Link Copied!

Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 28,000 dinars to be recelved on March 1, 2021. Icebreaker enters into a forward contract on December 1, 2020, to sell 28,000 dinars on March 1, 2021. The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis. Relevant exchange rates for the dinar on various dates are as follows: Icebreaker must close its books and prepare financial statements at December 31. 1 Record the sales and foreign currency account receivable. 2 Record the forward contract. 3 Record the entry to revalue the foreign currency account receivable. 4 Record the change in the fair value of the forward contract. 5 Record the foreign exchange gain or loss on the forward contract. 6 Record the amortization of the forward contract premium or discount. 7 Record the entry to revalue the foreign currency account receivable. 8 Record the entry to adjust the carrying value of the forward contract to its current fair value. 9 Record the foreign exchange gain or loss on the forward contract. 10 Record the amortization of the forward contract premium or discount. 11 Record the receipt of dinars from the foreign customer. 12 Record the settlement of the forward contract. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries for the sale and foreign currency forward contract in U.S. dollars. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.) Journal entry worksheet wote: tnter aedits verore creaits. Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 28,000 dinars to be recelved on March 1, 2021. Icebreaker enters into a forward contract on December 1, 2020, to sell 28,000 dinars on March 1, 2021. The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis. Relevant exchange rates for the dinar on various dates are as follows: Icebreaker must close its books and prepare financial statements at December 31. 1 Record the sales and foreign currency account receivable. 2 Record the forward contract. 3 Record the entry to revalue the foreign currency account receivable. 4 Record the change in the fair value of the forward contract. 5 Record the foreign exchange gain or loss on the forward contract. 6 Record the amortization of the forward contract premium or discount. 7 Record the entry to revalue the foreign currency account receivable. 8 Record the entry to adjust the carrying value of the forward contract to its current fair value. 9 Record the foreign exchange gain or loss on the forward contract. 10 Record the amortization of the forward contract premium or discount. 11 Record the receipt of dinars from the foreign customer. 12 Record the settlement of the forward contract. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries for the sale and foreign currency forward contract in U.S. dollars. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.) Journal entry worksheet wote: tnter aedits verore creaits

Answer & Explanation Solved by verified expert

See Answer