Hedging Foreign-Currency-Denominated Asset Ruhf Company, a U.S. firm, manufactures culinary equipment for sale to customers worldwide. On September 1, 2013, Ruhf Company sold coffee-roasting equipment...

Hedging Foreign-Currency-Denominated Asset Ruhf Company, a U.S. firm, manufactures culinary equipment for sale to customers worldwide. On September 1, 2013, Ruhf Company sold coffee-roasting equipment to a Brazilian customer at an invoice price of 40,000,000 real; the customer paid on September 30, 2013. Ruhf hedged its risk exposure by selling forward 40,000,000 real on September 1 for delivery on September 30, at a forward rate of $0.652/real. The spot rate was $0.65/real on September 1 and fell to $0.64 on September 30. Required a. Prepare the journal entries made by Ruhf on September 1 and September 30. b. Calculate the cash gain or loss realized by Ruhf by hedging compared with not hedging. View Solution:

Hedging Foreign Currency Denominated Asset Ruhf Company a U S firm manufactures culinary