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Colony Corp., a U.S. corporation, entered into a contract on November 1, 2010, to sell two machines to Crown Company, for 95,000 foreign currency units (FCU). The machines were to be delivered and the amount collected on March 1, 2011.

In order to hedge its commitment, Colony entered into a forward contract for 95,000 FCU delivery on March 1, 2011. The forward contract met all conditions for hedging an identifiable foreign currency commitment.

Selected exchange rates for FCU at various dates were as follows:

November 1, 2010 - Spot rate $1.3076

Forward rate for delivery on March 1, 2011 1.2980

December 31, 2010 - Spot rate 1.3060

Forward rate for delivery on March 1, 2011 1.3150

March 1, 2011 - Spot rate 1.2972

Required:

Prepare all journal entries relative to the above on the books of Colony Corp. on the following dates:

1. November 1, 2010.

2. Year-end adjustments on December 31, 2010.

3. March 1, 2011. (Include all adjustments related to the forward contract.)

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9943818

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