Question

Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2017, with payment of 29,000 korunas to be received on March 1, 2018. Brandlin enters into a forward contract on December 1, 2017, to sell 29,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows: Spot Rate $ 4.70 Date December 1, 2017 December 31, 2017 March 1, 2018 Forward Rate (to March 1, 2018) $ 4.775 4.900 N/A 4. 80S 4.95 Brandlin's incremental borrowing rate is 18 percent. The present value factor for two months at an annual interest rate of 18 percent (1.5 percent per month) is 0.9707. Brandlin must close its books and prepare financial statements at December 31.

Answer 1

Answer: 60. Journal erties for these frangetons ºn u.s dollars - Date oldata) 19/1117 136,300 General Journal Di bet (6) Accounts Receivable (99,000x4.70) 136,300 salec Accounts Receivable 2.900 foreign Exchange Gain (89,000x{4.80-417) 2400 3518.78 311118 4350 Loss on forward contract 3518.78 forward contact 29,000x (41.775-4.900)=-3625X0.9707 Accounts recomable 4350 foreign exchange goin(29,000 x [4.25-4x) Loss on forumayd contract . 1556:22 forward contract 29,000 (4.95–4775) - 3518.78 foreign currency 143,550 Accounts receivables (29,000x4.95). cash (aq,000 x 40775) : 138,475 forward contract 5075 foreign currency 1556.02 143,550 143,550

ba) The impact on dolf net income & 1361300 2.900 - sale foreign Enchange gain Lass.com foruma.comcdiact Total |(3518.78) 135681.22 imnath on 2018 not income foreign Exchange gava boss.con forward. Compact Total 4350 6556.22) 2193.18 bo impact on not income over both periods -135681.22 + 2793.78 = 138, 475 - Cach in-flow.