On October 1, 2021, Jarvis Co

question 78

Essay

On October 1, 2021, Jarvis Co. sold inventory to a customer in a foreign country, denominated in 100,000 local currency units (LCU). Collection is expected in four months. On October 1, 2021, a forward exchange contract was acquired whereby Jarvis Co. was to pay 100,000 LCU in four months (on February 1, 2022)and receive $78,000 in U.S. dollars. The spot and forward rates for the LCU were as follows:
The company's borrowing rate is 12%. The present value factor for one month is 0.9901.Any discount or premium on the contract is amortized using the straight-line method.Assuming this is a cash flow hedge; prepare journal entries for this sales transaction and forward contract.

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Definitions:

Large Arm Vein

A major vein in the arm, typically used for medical procedures such as the insertion of intravenous lines for medication delivery or blood withdrawal.

Intravenous Tubing

Flexible tubes used to deliver medications, fluids, and nutrients directly into a vein.

Blood Transfusion

The process of transferring blood or blood products from one person to another to replace lost components of the blood.

Blood Type

A classification of blood based on the presence or absence of inherited antigenic substances on the surface of red blood cells. The main blood types are A, B, AB, and O.