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On November 1, 2014, Ross Corporation, a calandar-year U.S. Corporation,

invested in a purely
?speculative contact to purchase 1 million euros on January 30, 2015, from Trattoria
Company, an
?Italian borkerage firm. Ross agreed to purchase 1,000,000 euros from Trattoria at a
fixed price of
?$1.420 per euro. Trattoria agreed to transmit 1,000,000 euros to Ross on January
30, 2015.
?Net settlement is not permitted. The spot rates for euros are:

?Nov 01, 2014 1 euro-$1.415

?Dec 31, 2014 1 euro-$1.395
?Jan 30, 2015 1 euro-$1.410

?The 30 day future rate for euros on December 31, 2014 was $1.405. Prepare the
General Journal entries that
?Ross would record on November 1, December 31, and January 30.

?Please help me. Thank you!

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Date Accounts Title and Debit credit
Explanation
Nov 1, 2014 Contract Receivable (euro) $ 1,420,000
Contract Payable $ 1,420,000
(1,000,000 x $1.420/euro)

Dec 31, Exchange Loss $ 15,000

2014
Contract Receivable (euro) $ 15,000
{1,000,000 x ($1.405 -
$1.420)}

Jan 30, 2015Contract Receivable (euro) $ 5,000

Exchange Gain $ 5,000
{1,000,000 x ($1.410 -
$1.405)}

Cash (euro) $ 1,410,000

Contract Payable $ 1,420,000
Cash $ 1,420,000
Contract Receivable (euro) $ 1,410,000
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