1
Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2013, with payment of 31,000 korunas to be received on March 1, 2014. Brandlin enters into a forward contract on December 1, 2013, to sell 31,000 korunas on March 1, 2014. Relevant exchange rates for the koruna on various dates are as follows:
 Date
Spot Rate
Forward Rate (to March 1, 2014)
 December 1, 2013
$
4.20
$
4.275
 December 31, 2013
 
4.30
 
4.400
 March 1, 2014
 
4.45
 
N/A
Brandlin’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Brandlin must close its books and prepare financial statements at December 31.
a-1.
Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars. (Leave no cells blank. If no entry is required, select “No Journal Entry Required” in the account field and zero (0) in the amount field. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
Date
General Journal
 Debit
 Credit
12/1/13  
 To record the sales.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 To record the forward contract.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12/31/13  
 To record foreign exchange gain.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 To record forward contract as a liability.
 
 
 
 
  
 
 
 
 
  
 
 
 
 
 
 To record loss on forward contract.
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 To allocate forward contract premium revenue.
 
 
 
 
  
 
 
 
 
 
 
 
 
 
3/1/14  
 To record foreign exchange gain.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 To record forward contract as a liability.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 To record loss on forward…