On December 1,20X8,Secure Company bought a 90-day forward contract to purchase 200,000 euros (€)at a forward rate of €1 = $1.35 when the spot rate was $1.33.Other exchange rates were as follows:
Required
1.Prepare all journal entries related to Secure Company's foreign currency speculation from December 1,20X8,through March 1,20X9,assuming the fiscal year ends on December 31,20X8.
2.Did the company gain or lose on its purchase of the forward contract?
Definitions:
Total Period Cost
The sum of all costs, both fixed and variable, incurred during a specified period of time, excluding product manufacturing costs.
Variable Costing
A costing method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product cost.
Net Operating Income
A company's revenue minus its direct costs and operating expenses, indicating the profitability from regular operations before interest and taxes.
Absorption Costing
An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the price of a product.
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