View the step-by-step solution to:

On March 1, 2010, Jacoby Ltd., a Canadian company, entered into a contract to buy supplies from Hornblower Co., a foreign company, for FC400,000.

On March 1, 2010, Jacoby Ltd., a Canadian company, entered into a contract to buy supplies from Hornblower Co., a foreign company, for FC400,000. The contract requires Hornblower to deliver the supplies to Jacoby on July 15, 2010. Payment is required to be made in full upon delivery. On March 1, 2010, Jacoby entered into a forward contract with the bank to purchase FC400,000 on July 15, 2010. As promised, Hornblower delivered the goods on July 15th and payment was made in full. Jacoby has a June 30th year end date.


Spot Rate Forward Rate

March 1, 2010 FC1 = 4.80 CAD FC1 = 4.92 CAD

June 30, 2010 FC1 = 4.83 CAD FC1 = 4.88 CAD

July 15, 2010 FC1 = 4.85 CAD FC1 = 4.85 CAD


Prepare Jacoby Ltd.'s journal entries

a. assuming the forward contract is a cash flow hedge

b. assuming the forward contract is a fair value hedge

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question