Kale Inc. is a Canadian company that regularly purchases components from suppliers in Japan. Kale...
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Kale Inc. is a Canadian company that regularly purchases components from suppliers in Japan. Kale Inc. expected to purchase raw materials from Spinach K.K. in Tokyo, Japan at a cost of Japanese Yen (JPY) 5,000,000 on February 1, Year 2. To hedge this forecasted transaction, Kale Inc. enters into four-month forward contract on October 1, Year 1 to purchase 5,000,000 on February 1, Year 2. It appropriately designates the forward contract as a fair value hedge. On February 1, year 2, the forward contract is settled with the bank and Spinach K.K. is paid for delivering the goods to Kale Inc. The following spot and forward exchange rates exist during the period October to February
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