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On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer...

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Accounting

On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 100,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 100,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:

Date

Spot Rate

Forward Rate (to April 30, 2018)

November 1, 2017

$0.21

$0.20

December 31, 2017

0.19

0.17

April 30, 2018

0.18

N/A

Bernards incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.

Prepare the journal entries for the original sale, recording adjusting entries at 12/31, and the settlement on 4/30.

November 1, 2017 Journal Entries

December 31, 2017 Journal Entries

1.

2.

3.

April 30, 2017 Journal Entries

1.

2.

3.

4. Receipt of Cash

5. Change of FX to USD Cash

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