Answer: Please refer to Explanation
Explanation:
1 October 2017
No entry required as contract not yet exercised
31st December 2017
DR Forward Contract (220,000*(0.67-0.66)) $2,200
CR Translation Adjustment $2,200
(To record change in value of forward contract )
31st December 2017
DR Foreign Currency (Kites) (220,000*0.66) $145,200
CR Cash $145,200
(To record purchase of foreign currency)
31st December 2017
DR Cash ( 145,200 + 2,200) $147,400
CR Foreign Currency (Kites) $145,200
CR Forward Contract $2,200
(To record delivery of foreign currency and forward contract execution)
