On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier...
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Accounting
On March Derby Corporation a USbased company expects to order merchandise from a supplier in Norway in three months. On March when the spot rate is $ per Norwegian krone, Derby enters into a forward contract to purchase Norwegian kroner at a threemonth forward rate of $ Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straightline basis. At the end of three months, when the spot rate is $ per Norwegian krone, Derby orders and receives the merchandise, paying kroner. The merchandise is sold within days.
Required:
a Prepare all journal entries for Derby Corporation related to this transaction and hedge.
a What amount should Derby Corporation report in the current years net income as cost of goods sold?
b What amount should Derby Corporation report in the current years net income as foreign exchange gain or loss?
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