Short Link Company (SLC)issued a purchase order to buy a machine from Frankfurt Ltd. ,a German company,on April 2,20X6.The contract price is €650,000 and delivery is to occur on August 31,20X6.Payment is due on October 15,20X6.
SCL entered into a forward contract to hedge against the Euro exchange rate for €1 million coming due on August 31,20X6.SLC has a December 31 year end.
Delivery of the machine occurred on the date specified and the company paid the amount and settled the forward contract October 15,20X6.
The exchange rates were as followed:
Required:
SLC reports under ASPE.
a.Explain how the forward contract will be accounted for under ASPE.
b.Prepare the journal entries to record the above transactions.
Definitions:
Cognitive Dissonance
A psychological phenomenon where an individual experiences discomfort due to holding conflicting cognitions, prompting them to seek consistency.
Role Playing
A method for exploring the behaviors and attitudes of individuals by having them act out roles in specific scenarios.
Situational Attribution
The process of attributing a person's behavior to external or situational factors, as opposed to internal dispositions.
Dispositional
Relating to inherent qualities or tendencies of a person's character or temperament.
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