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Question $3$ Partially correct

Mark $10\mathrm{.}00$ out of $20\mathrm{.}00$

Hedging Exposed Asset Position with Adjusting Entries

On November $3,2023,$ Robin Franchises, a U$.$S$.$ company, sold merchandise to a franchisee in the U$.$K$.,$ at a price of $8,000,000,$ payable in three months in pounds. To hedge its exposed asset position, on November $3,2023,$ Robin entered a forward contract for delivery of $8,000,000$ to the broker on February $3,2024.$ On February $3,2024,$ Robin received payment from the franchisee, and delivered the pounds to the broker to close the forward contract. Robin's accounting year ends December $31.$ Exchange rates $(\frac{\text{\$}}{})$ are as follows:

$\backslash$table$[[,$Spot rate,$\backslash$table$[[$Forward rate for delivery$],[$February $3,2024]]],[$November $3,2023,$$$1\mathrm{.}4168,$$$1\mathrm{.}4166],[$December $31,2023,1\mathrm{.}4164,1\mathrm{.}4163],[$February $3,2024,1\mathrm{.}4162,-]]$

a$.$ Prepare the journal entries Robin Franchises made on November $3,2023$ and February $3,2024,$ as well as the required end of year adjusting entry.

$\backslash$table$[[$General Journal$],[$Date$,$Description,Debit,Credit$],[11/03/23,$Accounts receivable,$11,340,000\backslash$times $,0],[$Sales revenue,$0,11,340,000\backslash$times $],[$To record sale to franchisee.,,$],[12/31/23,$Foreign currency,$4,000\backslash$times $,0],[$Exchange gain,$0,4,000\backslash$times $],[$To restate the receivable.,,$],[$Foreign currency,$0\backslash$times $,0],[$Exchange gain,$0,0\backslash$times $],[$To restate the forward contract.,,$],[02/03/24,$Accounts receivable,$0\backslash$times $,0],[$Investment in forward contract,$0,0\backslash$times $],[$To restate the receivable.,,$],[$Investment in forward contract,$0\backslash$times $,0],[$Exchange gain,$0,0\backslash$times $],[$To restate the forward sale contract.,,$],[$Cash$,0\backslash$times $,0],[$Accounts receivable,$0,0\backslash$times $],[$To record receipt of payment from franchisee.,,$],[$Investment in forward contract,$\backslash$times $11,332,800,0],[$Cash$,0,0\backslash$times $],[$Foreign currency,$0,0\backslash$times $],[$To record settlement of the forward sale contract.,,$]]$

b$.$ Calculate the cash gain or loss realized by Robin Franchises by hedging compared with not hedging.

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