Spitz Company ordered merchandise from a foreign supplier onNovember 20 at a price of...

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Accounting

Spitz Company ordered merchandise from a foreign supplier onNovember 20 at a price of 109,000 forints when the spot rate was$0.59 per forint. Delivery and payment were scheduled for December20. On November 20, Spitz acquired a call option on 109,000 forintsat a strike price of $0.59, paying a premium of $0.01 per forint.It designates the option as a fair value hedge of a foreigncurrency firm commitment. The fair value of the firm commitment ismeasured by referring to changes in the spot rate. The merchandisearrives and Spitz makes payment according to schedule. Spitz sellsthe merchandise by December 31, when it closes its books.
Assuming a spot rate of $0.62 per forint on December 20, prepareall journal entries to account for the foreign currency option,foreign currency firm commitment, and purchase of inventory.
Assuming a spot rate of $0.57 per forint on December 20, prepareall journal entries to account for the foreign currency option,foreign currency firm commitment, and purchase of inventory.

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ANSWER Req a date general jounral debit credit Nov20 Foreign currency option 1090 cash 1090 109000 001 Nov20 no journal entry required Dec20 Loss on firm commitment 3270 firm commitment 3270 062 059109000 Dec20 foreign currency See Answer

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In: AccountingSpitz Company ordered merchandise from a foreign supplier onNovember 20 at a price of 109,000...Spitz Company ordered merchandise from a foreign supplier onNovember 20 at a price of 109,000 forints when the spot rate was$0.59 per forint. Delivery and payment were scheduled for December20. On November 20, Spitz acquired a call option on 109,000 forintsat a strike price of $0.59, paying a premium of $0.01 per forint.It designates the option as a fair value hedge of a foreigncurrency firm commitment. The fair value of the firm commitment ismeasured by referring to changes in the spot rate. The merchandisearrives and Spitz makes payment according to schedule. Spitz sellsthe merchandise by December 31, when it closes its books.Assuming a spot rate of $0.62 per forint on December 20, prepareall journal entries to account for the foreign currency option,foreign currency firm commitment, and purchase of inventory.Assuming a spot rate of $0.57 per forint on December 20, prepareall journal entries to account for the foreign currency option,foreign currency firm commitment, and purchase of inventory.