On November 10, 2013, King Co

question 13

Essay

On November 10, 2013, King Co. sold inventory to a customer in a foreign country. King agreed to accept 96,000 local currency units (LCU) in full payment for this inventory. Payment was to be made on February 1, 2014. On December 1, 2013, King entered into a forward exchange contract wherein 96,000 LCU would be delivered to a currency broker in two months. The two month forward exchange rate on that date was 1 LCU = $.30. Any contract discount or premium is amortized using the straight-line method. The spot rates and forward rates on various dates were as follows:
The company's borrowing rate is 12%. The present value factor for one month is .9901.
(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 2013 net income.
(C.) Compute the effect on 2014 net income.

---

Definitions:

Antisocial Conduct

A pattern of behavior that is verbally or physically harmful to other people, animals, or property, including behavior that severely violates social expectations for a given environment.

Religious Services

Ceremonial acts of worship and practices observed by individuals or groups based on their religious beliefs.

Feel Closer to God

An emotional or spiritual state where an individual feels a stronger connection or a deeper relationship with a divine entity.

Spiritual Identity

The sense of self associated with one's beliefs, values, and practices regarding the quest for answers to questions about existence, consciousness, and the divine.