27 Dec Blanton Corporation is comprise

Advanced Accounting

Problem 1

On October 15, our company has executed a purchase order for new equipment to be purchased from a supplier in Denmark for a purchase price of DKK 1.2 million. The equipment is deliverable on March 31. In order to hedge the commitment to pay DKK1.2 million, we enter into a forward exchange contract on October 15 to receive DKK1.8 million on March 31 at an exchange rate of $0.17: DKK1. Assume the following exchange gates:

Date

Spot Rates

Forward Rates

October 15

$0.15:DKK1

$0.17:DKK1

December 31

$0.16:DKK1

$0.18:DKK1

March 31

$0.20:DKK1

n/a

Required: Prepare the journal entries to record the following:

· Execution of the purchase order and forward contract

· Adjusting entries at December 31

· Receipt of equipment and payment to equipment supplier on March 31.

Problem 2

Blanton Corporation is comprised of five operating segments. Information about each of these segments is as follows (in thousands):

Linens

Kitchen

Grocery

Furniture

Stationery

Sales to outsiders

$

47

$

253

$

22

$

61

$

14

Intersegment transfers

2

13

7

15

12

Interest revenue – outsiders

1

–

2

4

–

Interest revenue – intersegment

–

3

–

–

11

Operating expenses – outsiders

58

207

20

51

13

Operating expenses – intersegment

1

10

3

8

11

Interest expense

–

6

–

1

–

Income taxes

(2

)

5

2

3

12

Tangible assets

9

58

9

6

4

Intangible assets

–

–

2

4

–

Intersegment loans

4

3

–

–

–

–