Consider the following information:
On December a US firm plans to purchase a piece of equipment
with an asking price of francs in Switzerland during January of
The transaction is probable, and the transaction is to be
denominated in euros.
On December the company enters into a forward contract to buy
Swiss francs for $ on January
Spot rates and the forward rates for January settlement were as
follows dollars per Swiss franc:
On February the equipment was purchased for Swiss francs.
Required:
A Prepare all journal entries needed on December December January
and February to account for the forecasted transaction, the forward
contract, and the transaction to buy the equipment.
B When should the company reclassify any amounts reported in other
accumulated comprehensive income as a result of the cash flow hedge?
Answer B please
