On November 1 2013 Ambrose Company sold

merchandise to a #8129
On November 1, 2013, Ambrose Company sold merchandise to a foreign customer for 100,000
FCUs with payment to be received on April 30, 2014. At the date of sale, Ambrose entered into
a six-month forward contract to sell 100,000 LCUs. It properly designates the forward contract
as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:
Date____________________ Spot Rate _______ Forward Rate (to April 30, 2014)November 1,
2013 ...................$0.53 ......................................$0.52December 31, 2013 ...................0.50
........................................0.48April 30, 2014 .........................0.49
........................................N/AAmbrose's incremental borrowing rate is 12 percent. The present
value factor for four months at an annual interest rate of 12 percent (1 percent per month) is
0.9610.a. Prepare all journal entries, including December 31 adjusting entries, to record the sale
and forward contract.b. What is the impact on net income in 2013?c. What is the impact on net
income in 2014?View Solution:
On November 1 2013 Ambrose Company sold merchandise to a

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