(A) Assume This Hedge Is Designated as a Fair Value

question 90

Essay

(A.) Assume this hedge is designated as a fair value hedge.Prepare the journal entries relating to the transaction and the forward contract.
(B.) Compute the effect on 2018 net income.
(C.) Compute the effect on 2019 net income.

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Definitions:

Tax Return

A form filed with a government body, reporting income, expenses, and other pertinent tax information, used to calculate tax liability.

Mens Rea

A legal principle referring to the state of mind of a person who commits a crime, indicating intent or knowledge of wrongfulness.

Actus Reus

The physical act of committing a crime, as opposed to the mental intent (mens rea) to commit the act.

Mens Rea

A legal term referring to the intent or knowledge of wrongdoing that constitutes part of a crime.