Answer Happy

Assignment for chapter 7 On September 1, 2012, Denton Company, U.S. Company, sells parts to a foreign customer for 60,000 ZAR to be received on March 1, 2013, Denton enters into a forward contract on September 1, 2012 to sell 60,000 ZAR on March 1, 2013. The following exchange rates for 1 ZAR: Date Spot Rate Forward Rate September 1, 2012 December 31, 2012 0.90 March 1, 2013 The present value factor for two months at an annual interest rate of 12 percent is 0.9803. Denton must close its books and prepare financial statements at December 31. 0.90 0.92 1.00 0.95 Required: 1. Assuming that Denton designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare all journal entries for Denton Co. for these transactions in U.S. dollars. What is the impact on 2012 and 2013 net income? 2. Assuming that Denton designates the forward contract as a fair value hedge of a foreign currency receivable, prepare all journal entries for Denton Co. for these transactions in U.S. dollars.