Imperial Corp

question 31

Essay

Imperial Corp., a U.S. corporation, entered into a contract on November 1, 2016, to sell two machines to Crown Company, for 95,000 foreign currency units (FCU). The machines were to be delivered and the amount collected on March 1, 2017.
In order to hedge its commitment, Imperial entered into a forward contract for 95,000 FCU delivery on March 1, 2017. The forward contract met all conditions for hedging an identifiable foreign currency commitment.
Selected exchange rates for FCU at various dates were as follows: Required:
Prepare all journal entries relative to the above on the books of Imperial Corp. on the following dates:
1. November 1, 2016.
2. Year-end adjustments on December 31, 2016.
3. March 1, 2017. (Include all adjustments related to the forward contract.)

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Definitions:

Payoff Matrix

A table that displays the potential outcomes and strategies for each player in a game, used in game theory to determine the best strategies and predict the actions of the participants.

Duopoly

A market structure dominated by two companies, often resulting in closely competitive or collaborative strategies between them.

High-price Strategy

A pricing approach where goods or services are sold at a higher price point, typically justified by branding, quality, or unique features.

Low-price Strategy

A business approach where a company sets a lower price for its products or services than its competitors to attract more customers and gain market share.