Consider the Following Information

question 3

Essay

Consider the following information:
1. On November 1, 2017, a U.S. firm contracts to sell equipment (with an asking price of 500,000 pesos) in Mexico. The firm will take delivery and will pay for the equipment on February 1, 2018.
2. On November 1, 2017, the company enters into a forward contract to sell 500,000 pesos for $0.0948 on February 1, 2018.
3. Spot rates and the forward rates for February 1, 2018, settlement were as follows (dollars per peso): 4. On February 1, the equipment was sold for 500,000 pesos. The cost of the equipment was $20,000.
Required:
Prepare all journal entries needed on November 1, December 31, and February 1 to account for the forward contract, the firm commitment, and the transaction to sell the equipment.

Distinguish between unilateral and bilateral mistakes and their effects on contracts.

Comprehend the legal definitions and requirements for proving fraud and fraudulent misrepresentation.

Recognize the role of undue influence and duress in affecting the validity of contracts.

Grasp the legal consequences of undisclosed information and non-disclosure in contract formation.

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Definitions:

Disposable Income

Discretionary income for households to utilize in their saving and spending after the enforcement of income taxes.

Consumption

Refers to the use of goods and services by households or individuals for personal needs or for leisure, as opposed to investment or savings.

Billion

A numerical value represented by 1,000 million or 10^9.

Induced Consumption

Consumer spending that varies with income, representing the portion of income that households spend on goods and services rather than saving.