Dinesh bhai On November 1, 2023, Cheng Company (a U.S.-based company) forecasts the purchase of goods from a foreign supplier for 100,000yuan. Cheng expects to receive the goods on April 30, 2024, and make immediate payment. On November 1, 2023, Cheng enters intoa six-month forward contract to buy 100,000 yuan. The company properly designates the forward contract as a cash flow hedge of aforecasted foreign currency transaction. Forward points are excluded in assessing hedge effectiveness and are amortized to netIncome using a straight-line method on a monthly basis over the life of the contract. The following U.S. dollar-Yuan exchange ratesapply:Forward Rate (to AprilDateNovember 1, 2023December 31, 2023April 30, 2024Spot Rate$ 0.210.190.1830, 2024)$ 0.1950.170N/AAs expected, Cheng receives goods from the foreign supplier on April 30, 2024, and pays 100,000 yuan immediately. Cheng sells theimported goods in the local market in May 2024.Required:a. Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and importpurchase.b. What is the impact on net income in 2023?c. What is the impact on net income in 2024?

Forward Exchange Contact :Simply, forward exchange contract is entered into by two parties to buy or…

a. Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and import purchase. b. What is the impact on net income in 2023? c. What is the impact on net income in 2024?

a. Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and import purchase. b. What is the impact on net income in 2023? c. What is the impact on net income in 2024?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 2ST

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