On November 1,2020, Cheng Company (a U.S.-based company) forecasts the purchase of goods from a...
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On November Cheng Company a USbased company forecasts the purchase of goods from a foreign supplier for yuan. Cheng expects to receive the goods on April and make immediate payment. On November Cheng enters into a sixmonth forward contract to buy yuan. The company properly designates the forward contract as a cash flow hedge of a forecasted foreign currency transaction. Forward points are excluded in assessing hedge effectiveness and are amortized to net income using a straightline method on a monthly basis over the life of the contract. The following US dollarYuan exchange rates apply: Date Spot Rate Forward Rate to April November $ $ December April NA As expected, Cheng receives goods from the foreign supplier on April and pays yuan immediately. Cheng sells the imported goods in the local market in May Prepare all journal entries, inclu
On November Cheng Company a USbased company forecasts the purchase of goods from a foreign supplier for yuan. Cheng expects to receive the goods on April and make immediate payment. On November Cheng enters into a sixmonth forward contract to buy yuan. The company properly designates the forward contract as a cash flow hedge of a forecasted foreign currency transaction. Forward points are excluded in assessing hedge effectiveness and are amortized to net income using a straightline method on a monthly basis over the life of the contract. The following US dollarYuan exchange rates apply: Date Spot Rate Forward Rate to April November $ $ December April NA As expected, Cheng receives goods from the foreign supplier on April and pays yuan immediately. Cheng sells the imported goods in the local market in May Prepare all journal entries, inclu
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