Prepare journal entries necessary to record transaction

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Reference no: EM133921680

Problem

On July 1, 2023, (ABC) Inc. purchased merchandise from a supplier in the US for US$800,000 with terms requiring full payment by October 31, 2023. On July 2, 2023, entered into a forward contract to purchase US$800,000 on October 31, 2023 at a rate of CDN$1.2275. The forward contract was designated as a hedge of the fair value of the amount due to the supplier. On October 31, 2023, ABC paid its supplier in full. Selected dates and spot rates are shown below: Spot RatesForward Rates (for 3- month contract) July 1 & 2, 2023 US$1 = CDN $1.2150 US$1 = CDN $1.2275 July 31, 2023 US$1 = CDN $1.2175 US$1 = CDN $1.2225 October 31, 2023 US$1 = CDN $1.22 US$1 = CDN $1.22 ABC has a July 31st year end. Required:

1. Prepare all relevant journal entries necessary to record the above transaction assuming the forward contract is segregated between the spot element and the forward element. ABC uses the net method to record the forward contract. Get the instant assignment help.

2. Assuming that a forward contract was not entered into, prepare the relevant journal entries arising from this transaction.

Reference no: EM133921680

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