On February 1, Durham Company writes a forward contract to sell Rubright Company 3,000,000 yen at a specific, fixed price of $0.00875 per yen with delivery in 60 days. The spot rate at the end of the 60 days is $0.00913 per yen. The following is the forward rates information throughout the 60-day term.
Assume the discount rate is 7%.
Required:
a.Compute the gain or loss for Rubright Company over the life of the contract.
b.Assume the contract is settled at the end of the 60 days, prepare the journal entries to account for this contract on Rubright's books.

Question

On February 1, Durham Company writes a forward contract to sell Rubright Company 3,000,000 yen at a specific, fixed price of $0.00875 per yen with delivery in 60 days. The spot rate at the end of the 60 days is $0.00913 per yen. The following is the forward rates information throughout the 60-day term.  
Assume the discount rate is 7%.
Required: 
a.Compute the gain or loss for Rubright Company over the life of the contract.
b.Assume the contract is settled at the end of the 60 days, prepare the journal entries to account for this contract on Rubright's books.

Quizplus · Accepted Answer

The Answer of On February 1, Durham Company writes a forward contract to sell Rubright Company 3,000,000 yen at a specific, fixed price of $0.00875 per yen with delivery in 60 days. The spot rate at the end of the 60 days is $0.00913 per yen. The following is the forward rates information throughout the 60-day term.  
Assume the discount rate is 7%.
Required: 
a.Compute the gain or loss for Rubright Company over the life of the contract.
b.Assume the contract is settled at the end of the 60 days, prepare the journal entries to account for this contract on Rubright's books.

On February 1, Durham Company Writes a Forward Contract to Sell