Journal entries necessary for crane

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On December 1, 2007, Crane Corporation agreed to purchase a machine to be manufactured by a company in Germany. The purchase price as 1,200,000 German marks. To hedge against fluctuations in the exchange rate, Crane entered into a forward contract on December 1 to buy 1,200,000 marks on April 1, the agreed date of machine delivery, for $.475 per mark. The following exchange rates were quoted:

Forward Rate

Date Spot Rate (Delivery on 4/1)

December 1 .490 .475

December 31 .470 .473

April 1 .485 --

Required:

Prepare journal entries necessary for Crane during 2007 and 2008 to account for the transactions described above.

Reference no: EM13141151

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