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On December 15, a Company Enters into a Foreign Currency

question 67

Essay

On December 15, a company enters into a foreign currency forward to buy €300,000 at C$1.60 per euro in 30 days. The exchange rate on the day of the company's year-end of December 31 was C$1.59: €l.
Required:
Record the journal entries related to this forward contract.


Definitions:

Rational Consumer

An assumption in economics that consumers always make logical decisions that provide them with the highest level of personal utility.

Net Borrower

An entity, such as a government or a business, that borrows more money than it lends, resulting in a net outflow of funds.

Interest Rate

The part of a loan that incurs interest for the borrower, generally expressed as an annual percentage of the outstanding loan.

Net Saver

An individual or institution that saves more resources or funds than they spend or consume.

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