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    Prepare journal entries for hedge contracts

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    See problems in attached Excel file.

    Problem 1
    Norton Co., a U.S. corporation, sold inventory on December 1, 2007, with payment of 10,000 British pounds to be received in 60 days. The pertinent exchange rates were as follows:
    SPOT
    RATE
    December 1, 2007 $1.7241
    December 31, 2007 $1.8182
    January 30, 2008 $1.6666

    Required: Create any journal entries for December 1 and 31, 2007 and January 30, 2008.
    The firm's fiscal year ends December 31.

    Problem 2
    Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2006, with payment of 10 million Korean won to be received on January 15, 2007. The following exchange rates applied:
    FORWARD
    SPOT RATE
    RATE TO JAN 15
    December 16, 2006 0.00090 0.00098
    December 31, 2006 0.00092 0.00093
    January 15, 2007 0.00095 0.00095

    A forward contract is purchased to hedge using the fair value method and fiscal year is December 31.
    Assume an annual interest rate of 12% and a fair value hedge.
    The present value for 1/2 month at 12% (1% per month) is 0.9950

    Required: A. Create the entries for 12-16 and 31, 2006 and 1-15-07
    B. Create the entries if using the cash flow method

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    https://brainmass.com/business/journal-entries/prepare-journal-entries-for-hedge-contracts-369229

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