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Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

CHAPTER 9
FOREIGN CURRENCY TRANSACTIONS AND
HEDGING FOREIGN EXCHANGE RISK

Chapter Outline

I. In today’s global economy, a great many companies deal in currencies other than their
reporting currencies.
A. Merchandise may be imported or exported with prices stated in a foreign currency.
B. For reporting purposes, foreign currency balances must be stated in terms of the
company’s reporting currency by multiplying it by an exchange rate.
C. Accountants face two questions in restating foreign currency balances.
1. What is the appropriate exchange rate for restating foreign currency balances?
2. How are changes in the exchange rate accounted for?
D. Companies often engage in foreign currency hedging activities to avoid the adverse impact
of exchange rate changes.
E. Accountants must determine how to properly account for these hedging activities.

II. Foreign exchange rates are determined in the foreign exchange market under a variety of
different currency arrangements.
A. Exchange rates can be expressed in terms of the number of U.S. dollars to purchase one
foreign currency unit (direct quotes) or the number of foreign currency units that can be
obtained with one U.S. dollar (indirect quotes).
B. Foreign currency trades can be executed on a spot or forward basis.
1. The spot rate is the price at which a foreign currency can be purchased or sold today.
2. The forward rate is the price today at which foreign currency can be purchased or sold
sometime in the future.
3. Forward exchange contracts provide companies with the ability to “lock in” a price
today for purchasing or selling currency at a specific future date.
C. Foreign currency options provide the right but not the obligation to buy or sell foreign
currency in the future, and therefore are more flexible than forward contracts.

III. FASB Accounting Standards Codification Topic 830, Foreign Currency Matters (FASB ASC
830) prescribes accounting rules for foreign currency transactions.
A. Export sales denominated in foreign currency are reported in U.S. dollars at the spot
exchange rate at the date of the transaction. Subsequent changes in the exchange rate
until collection of the receivable are reflected through a restatement of the foreign currency
account receivable with an offsetting foreign exchange gain or loss reported in income.
This is known as a two-transaction perspective, accrual approach.
B. The two-transaction perspective, accrual approach also is used in accounting for foreign
currency payables. Receivables and payables denominated in foreign currency create an
exposure to foreign exchange risk; this is the risk that changes in the exchange rate over
time will result in a foreign exchange loss.

IV. FASB Accounting Standards Codification Topic 815, Derivatives and Hedging (FASB ASC
815) governs the accounting for derivative financial instruments and hedging activities
including the use of foreign currency forward contracts and foreign currency options.

9-1
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

A. The fundamental requirement is that all derivatives must be carried on the balance sheet at
their fair value. Derivatives are reported on the balance sheet as assets when they have a
positive fair value and as liabilities when they have a negative fair value.
B. U.S. GAAP provides guidance for hedges of the following sources of foreign exchange risk:
1. foreign currency denominated assets and liabilities.
2. unrecognized foreign currency firm commitments.
3. forecasted foreign denominated currency transactions.
4. net investments in foreign operations (covered in Chapter 10).
C. Companies prefer to account for hedges in such a way that the gain or loss from the hedge
is recognized in net income in the same period as the loss or gain on the risk being
hedged. This approach is known as hedge accounting. Hedge accounting for foreign
currency derivatives may be applied only if three conditions are satisfied:
1. the derivative is used to hedge either a cash flow exposure or fair value exposure to
foreign exchange risk,
2. the derivative is highly effective in offsetting changes in the cash flows or fair value
related to the hedged item, and
3. the derivative is properly documented as a hedge.
D. Hedge accounting is allowed for hedges of two different types of exposure: cash flow
exposure and fair value exposure. Hedges of (1) foreign currency denominated assets and
liabilities, (2) foreign currency firm commitments, and (3) forecasted foreign currency
transactions can be designated as cash flow hedges. Hedges of (1) and (2) also can be
designated as fair value hedges. Accounting procedures differ for the two types of hedges.
E. For cash flow hedges of foreign currency denominated assets and liabilities, at each
balance sheet date:
1. The hedged asset or liability is adjusted to fair value based on changes in the spot
exchange rate, and a foreign exchange gain or loss is recognized in net income.
2. The derivative hedging instrument is adjusted to fair value (resulting in an asset or
liability reported on the balance sheet), with the counterpart recognized as a change in
Accumulated Other Comprehensive Income (AOCI).
3. An amount equal to the foreign exchange gain or loss on the hedged asset or liability is
then transferred from AOCI to net income; the net effect is to offset any gain or loss on
the hedged asset or liability.
4. An additional amount is removed from AOCI and recognized in net income to reflect (a)
the current period’s amortization of the original discount or premium on the forward
contract (if a forward contract is the hedging instrument) or (b) the change in the time
value of the option (if an option is the hedging instrument).
F. For fair value hedges of foreign currency denominated assets and liabilities, at each
balance sheet date:
1. The hedged asset or liability is adjusted to fair value based on changes in the spot
exchange rate, and a foreign exchange gain or loss is recognized in net income.
2. The derivative hedging instrument is adjusted to fair value (resulting in an asset or
liability reported on the balance sheet), with the counterpart recognized as a gain or
loss in net income.
G. Under fair value hedge accounting for hedges of foreign currency firm commitments:
1. the gain or loss on the hedging instrument is recognized currently in net income, and
2. the change in fair value of the firm commitment is also recognized currently in net
income.

9-2
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

3.
This accounting treatment requires (1) measuring the fair value of the firm commitment, (2)
recognizing the change in fair value in net income, and (3) reporting the firm commitment
on the balance sheet as an asset or liability. A decision must be made whether to
measure the fair value of the firm commitment through reference to (a) changes in the spot
exchange rate or (b) changes in the forward rate.
H. Cash flow hedge accounting is allowed for hedges of forecasted foreign currency
transactions. For hedge accounting to apply, the forecasted transaction must be probable
(likely to occur). The accounting for a hedge of a forecasted transaction differs from the
accounting for a hedge of a foreign currency firm commitment in two ways:
1. Unlike the accounting for a firm commitment, there is no recognition of the forecasted
transaction or gains and losses on the forecasted transaction.
2. The hedging instrument (forward contract or option) is reported at fair value, but
because there is no gain or loss on the forecasted transaction to offset against,
changes in the fair value of the hedging instrument are not reported as gains and
losses in net income. Instead they are reported in other comprehensive income. On
the projected date of the forecasted transaction, the cumulative change in the fair value
of the hedging instrument is transferred from other comprehensive income (balance
sheet) to net income (income statement).

V. IFRS is very similar to U.S. GAAP with respect to the accounting for foreign currency
transactions and hedging of foreign exchange risk.
A. IAS 21 requires the use of a two-transaction perspective in accounting for foreign currency
transactions with unrealized foreign exchange gains and losses accrued in net income in
the period of exchange rate change.
B. IAS 39 allows hedge accounting for foreign currency hedges of recognized assets and
liabilities, firm commitments, and forecasted transactions when documentation
requirements and effectiveness tests are met. Hedges are designated as cash flow or fair
value hedges.
C. One difference between IFRS and U.S. GAAP relates to the type of financial instrument
that can be designated as a foreign currency cash flow hedge. Under U.S. GAAP, only
derivative financial instruments can be used as a cash flow hedge, whereas IFRS also
allows non-derivative financial instruments, such as foreign currency loans, to be
designated as hedging instruments in a foreign currency cash flow hedge.

Answer to Discussion Question: Do We Have a Gain or What?

This case demonstrates the differing kinds of information provided through application of current
accounting rules for foreign currency transactions and derivative financial instruments.

The Ahnuld Corporation could have received $200,000 from its export sale to Tcheckia if it had
required immediate payment. Instead, Ahnuld allows its customer six months to pay. Given the
future exchange rate of $1.70, Ahnuld would have received only $170,000 if it had not entered into
the forward contract. This would have resulted in a decrease in cash inflow of $30,000. In
accordance with current accounting standards, the decrease in the value of the tcheck receivable is
recognized as a foreign exchange loss of $30,000. This loss represents the cost of extending credit
to the foreign customer if the tcheck receivable is left unhedged.

9-3
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

However, rather than leaving the tcheck receivable unhedged, Ahnuld sells tchecks forward at a
price of $180,000. Because the future spot rate turns out to be only $1.70, the forward contract
provides a benefit, increasing the amount of cash received from the export sale by $10,000. In
accordance with current accounting standards, the change in the fair value of the forward contract
(from zero initially to $10,000 at maturity) is recognized as a gain on the forward contract of
$10,000. This gain reflects the cash flow benefit from having entered into the forward contract, and
is the appropriate basis for evaluating the performance of the foreign exchange risk manager.
(Students should be reminded that the forward contract will not always improve cash inflow. For
example, if the future spot rate were $1.85, the forward contract would result in $5,000 less cash
inflow than if the transaction were left unhedged.)

The net impact on income resulting from the fluctuation in the value of the tcheck is a loss of
$20,000. Clearly, Ahnuld forgoes $20,000 in cash inflow by allowing the customer time to pay for
the purchase, and the net loss reported in income correctly measures this. The $20,000 loss is
useful to management in assessing whether the sale to Tcheckia generated an adequate profit
margin, but it is not useful in assessing the performance of the foreign exchange risk manager. The
net loss must be decomposed into its component parts to fairly evaluate the risk manager’s
performance.

Gains and losses on forward contracts designated as fair value hedges of foreign currency assets
and liabilities are relevant measures for evaluating the performance of foreign exchange risk
managers. (The same is not true for cash flow hedges. For this type of hedge, performance should
be evaluated by considering the net gain or loss on the forward contract plus or minus the forward
contract premium or discount.)

Answers to Questions

1. Under the two-transaction perspective, an export sale (import purchase) and the subsequent
collection (payment) of cash are treated as two separate transactions to be accounted for
separately. The idea is that management has made two decisions: (1) to make the export sale
(import purchase), and (2) to extend credit in foreign currency to the foreign customer (obtain
credit from the foreign supplier). The income effect from each of these decisions should be
reported separately.

2. Foreign currency receivables resulting from export sales are revalued at the end of accounting
periods using the current spot rate. An increase in the value of a receivable will be offset by
reporting a foreign exchange gain in net income, and a decrease will be offset by a foreign
exchange loss. Foreign exchange gains and losses are accrued even though they have not
yet been realized.

3. Foreign exchange gains and losses are created by two factors: having foreign currency
exposures (foreign currency receivables and payables) and changes in exchange rates.
Appreciation of the foreign currency will generate foreign exchange gains on receivables and
foreign exchange losses on payables. Depreciation of the foreign currency will generate
foreign exchange losses on receivables and foreign exchange gains on payables.

9-4
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

4. Hedging is the process of eliminating exposure to foreign exchange risk so as to avoid

potential losses from fluctuations in exchange rates. In addition to avoiding possible losses,
companies hedge foreign currency transactions and commitments to introduce an element of
certainty into the future cash flows resulting from foreign currency activities. Hedging involves
establishing a price today at which foreign currency can be sold or purchased at a future date.

5. A party to a foreign currency forward contract is obligated to deliver one currency in exchange
for another at a specified future date, whereas the owner of a foreign currency option can
choose whether to exercise the option and exchange one currency for another or not.

6. Hedges of foreign currency denominated assets and liabilities are not entered into until a
foreign currency transaction (import purchase or export sale) has taken place. Hedges of firm
commitments are made when a purchase order is placed or a sales order is received, before a
transaction has taken place. Hedges of forecasted transactions are made at the time a future
foreign currency purchase or sale can be anticipated, even before an order has been placed or
received.

7. Foreign currency options have an advantage over forward contracts in that the holder of the
option can choose not to exercise if the future spot rate turns out to be more advantageous.
Forward contracts, on the other hand, can lock a company into an unnecessary loss (or a
reduced gain). The disadvantage associated with foreign currency options is that a premium
must be paid up front even though the option might never be exercised.

8. An enterprise is required to recognize all derivative financial instruments as assets or liabilities

on the balance sheet and measure them at fair value.

9. The fair value of a foreign currency forward contract is determined by reference to changes in
the forward rate over the life of the contract, discounted to the present value. Three pieces of
information are needed to determine the fair value of a forward contract at any point in time
during its life: (a) the contracted forward rate when the forward contract is entered into, (b) the
current forward rate for a contract that matures on the same date as the forward contract
entered into, and (c) a discount rate; typically, the company’s incremental borrowing rate.

The manner in which the fair value of a foreign currency option is determined depends on
whether the option is traded on an exchange or has been acquired in the over the counter
market. The fair value of an exchange-traded foreign currency option is its current market price
quoted on the exchange. For over the counter options, fair value can be determined by
obtaining a price quote from an option dealer (such as a bank). If dealer price quotes are
unavailable, the company can estimate the value of an option using the modified Black-
Scholes option pricing model. Regardless of who does the calculation, principles similar to
those in the Black-Scholes pricing model will be used in determining the value of the option.

10. Hedge accounting is defined as recognition of gains and losses on the hedging instrument in
the same period as the recognition of gains and losses on the underlying hedged asset or
liability (or firm commitment).

9-5
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

11. For hedge accounting to apply, the forecasted transaction must be probable (likely to occur),
the hedge must be highly effective in offsetting fluctuations in the cash flow associated with the
foreign currency risk, and the hedging relationship must be properly documented.

12. In both cases, (1) sales revenue (or the cost of the item purchased) is determined using the
spot rate at the date of sale (or purchase), and (2) the hedged asset or liability is adjusted to
fair value based on changes in the spot exchange rate with a foreign exchange gain or loss
recognized in net income.

For a cash flow hedge, the derivative hedging instrument is adjusted to fair value (resulting in
an asset or liability reported on the balance sheet), with the counterpart recognized as a
change in Accumulated Other Comprehensive Income (AOCI). An amount equal to the foreign
exchange gain or loss on the hedged asset or liability is then transferred from AOCI to net
income; the net effect is to offset any gain or loss on the hedged asset or liability. An additional
amount is removed from AOCI and recognized in net income to reflect (a) the current period’s
amortization of the original discount or premium on the forward contract (if a forward contract is
the hedging instrument) or (b) the change in the time value of the option (if an option is the
hedging instrument).

For a fair value hedge, the derivative hedging instrument is adjusted to fair value (resulting in
an asset or liability reported on the balance sheet), with the counterpart recognized as a gain
or loss in net income. The discount or premium on a forward contract is not allocated to net
income. The change in the time value of an option is not recognized in net income.

13. For a fair value hedge of a foreign currency asset or liability (1) sales revenue (cost of
purchases) is recognized at the spot rate at the date of sale (purchase) and (2) the hedged
asset or liability is adjusted to fair value based on changes in the spot exchange rate with a
foreign exchange gain or loss recognized in net income. The forward contract is adjusted to
fair value based on changes in the forward rate (resulting in an asset or liability reported on the
balance sheet), with the counterpart recognized as a gain or loss in net income. The foreign
exchange gain (loss) and the forward contract loss (gain) are likely to be of different amounts
resulting in a net gain or loss reported in net income.

For a fair value hedge of a firm commitment, there is no hedged asset or liability to account for.
The forward contract is adjusted to fair value based on changes in the forward rate (resulting in
an asset or liability reported on the balance sheet), with a gain or loss recognized in net
income. The firm commitment is also adjusted to fair value based on changes in the forward
rate (resulting in a liability or asset reported on the balance sheet), and a gain or loss on firm
commitment is recognized in net income. The firm commitment gain (loss) offsets the forward
contract loss (gain) resulting in zero impact on net income. Sales revenue (cost of purchases)
is recognized at the spot rate at the date of sale (purchase). The firm commitment account is
closed as an adjustment to net income in the period in which the hedged item affects net
income.

9-6
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

14. For a cash flow hedge of a foreign currency asset or liability (1) sales revenue (cost of
purchases) is recognized at the spot rate at the date of sale (purchase) and (2) the hedged
asset or liability is adjusted to fair value based on changes in the spot exchange rate with a
foreign exchange gain or loss recognized in net income. The forward contract is adjusted to
fair value (resulting in an asset or liability reported on the balance sheet), with the counterpart
recognized as a change in Accumulated Other Comprehensive Income (AOCI). An amount
equal to the foreign exchange gain or loss on the hedged asset or liability is then transferred
from AOCI to net income; the net effect is to offset any gain or loss on the hedged asset or
liability. An additional amount is removed from AOCI and recognized in net income to reflect
the current period’s allocation of the discount or premium on the forward contract.

For a hedge of a forecasted transaction, the forward contract is adjusted to fair value (resulting
in an asset or liability reported on the balance sheet), with the counterpart recognized as a
change in Accumulated Other Comprehensive Income (AOCI). Because there is no foreign
currency asset or liability, there is no transfer from AOCI to net income to offset any gain or
loss on the asset or liability. The current period’s allocation of the forward contract discount or
premium is recognized in net income with the counterpart reflected in AOCI. Sales revenue
(cost of purchases) is recognized at the spot rate at the date of sale (purchase). The amount
accumulated in AOCI related to the hedge is closed as an adjustment to net income in the
period in which the forecasted transaction was anticipated to occur.

15. In accounting for a fair value hedge, the change in the fair value of the foreign currency option
is reported as a gain or loss in net income. In accounting for a cash flow hedge, the change in
the entire fair value of the option is first reported in other comprehensive income, and then the
change in the time value of the option is reported as an expense in net income.

16. The accounting for a foreign currency borrowing involves keeping track of two foreign currency
payables—the note payable and interest payable. As both the face value of the borrowing and
accrued interest represent foreign currency liabilities, both are exposed to foreign exchange
risk and can give rise to foreign currency gains and losses.

Answers to Problems

1. C (Foreign exchange gain/loss on foreign currency transaction)

An import purchase causes a foreign currency payable to be carried on the

books. If the foreign currency depreciates, the dollar value of the foreign
currency payable decreases, yielding a foreign exchange gain.

2. D (Method of accounting for foreign currency transactions)

Current accounting standards require a two-transaction perspective, accrual

approach.

9-7
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

3. B (Foreign exchange gain/loss on foreign currency transaction)

Foreign exchange gains related to foreign currency import purchases are

treated as a component of income before income taxes. If there is no foreign
exchange gain in operating income, then the purchase must have been
denominated in U.S. dollars or there was no change in the value of the
foreign currency from October 1 to December 1, 2013.

4. C (Calculate foreign exchange gain/loss on foreign currency transaction)

The dollar value of the LCU receivable has decreased from $110,000 at
December 31, 2013 to $95,000 at February 15, 2014. This decrease of $15,000
should be reported as a foreign exchange loss in 2014.

5. D (Calculate foreign exchange gain/loss on foreign currency borrowing)

The increase in the dollar value of the euro note payable represents a foreign
exchange loss. In this case a $25,000 loss would have been accrued in 2013
and a $10,000 loss will be reported in 2014.

6. D (Foreign exchange gain/loss on foreign currency transaction)

A foreign currency receivable will generate a foreign exchange gain when the
foreign currency increases in dollar value. A foreign currency payable will
generate a foreign exchange gain when the foreign currency decreases in
dollar value. Hence, the correct combination is franc (increase) and peso
(decrease).

7. D (Calculate foreign exchange gain/loss)

The merchandise purchase results in a foreign exchange loss of $8,000, the

difference between the U.S. dollar equivalent at the date of purchase and at
the date of settlement.
The increase in the dollar equivalent of the note’s principal results in a
foreign exchange loss of $20,000.
The total foreign exchange loss is $28,000 ($8,000 + $20,000).

8. D (Forward contract cash flow hedge of foreign currency denominated

asset/liability)

The Thai baht is selling at a premium (forward rate exceeds spot rate). The
exporter will receive more dollars as a result of selling the baht forward than
if the baht had been received and converted into dollars on April 1. Thus, the
premium results in additional revenue for the exporter.

9-8
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

9. D (Forward contract fair value hedge of foreign currency firm commitment)

The parts inventory will be recognized at the spot rate at the date of purchase
(FC100,000 x $.23 = $23,000).

10. D (Determine the fair value of a forward contract)

The forward contract must be reported on the December 31, 2013 balance
sheet as a liability. Barnum has locked-in to purchase ringgits at $0.042 per
ringgit but could have locked-in to purchase ringgits at $0.037 per ringgit if it
had waited until December 31 to enter into the forward contract. The forward
contract must be reported at its fair value discounted for two months at 12%
[($.042 – $.037) x 1,000,000 = $5,000 x .9803 = $4,901.50].

11. C (Calculate foreign exchange gain/loss on foreign currency transaction)

The 10 million won receivable has changed in dollar value from $35,000 at
12/1/13 to $33,000 at 12/31/13. The won receivable will be written down by
$2,000 and a foreign exchange loss will be reported in 2013 income.

12. B (Forward contract fair value hedge of foreign currency denominated

asset/liability)

The nominal value of the forward contract on December 31, 2013 is a positive
$2,000, the difference between the amount to be received from the forward
contract actually entered into, $34,000 ($.0034 x 10 million), and the amount
that could be received by entering into a forward contract on December 31,
2013 that matures on March 31, 2014, $32,000 ($.0032 x 10 million). The fair
value of the forward contract is the present value of $2,000 discounted for
two months ($2,000 x .9706 = $1,941.20). On December 31, 2013, MNC Corp.
will recognize a $1,941.20 gain on the forward contract and a foreign
exchange loss of $2,000 on the won receivable. The net impact on 2013
income is –$58.80.

13. A (Forward contract cash flow hedge of forecasted foreign currency

transaction)

The krona is selling at a premium in the forward market, causing Pimlico to

pay more dollars to acquire kroner than if the kroner were purchased at the
spot rate on March 1. Therefore, the premium results in an expense of
$10,000 [($.12 – $.10) x 500,000].
The Adjustment to Net Income is the amount accumulated in Accumulated
Other Comprehensive Income (AOCI) as a result of recognizing the Premium
Expense and the fair value of the forward contract. The journal entries would
be as follows:

9-9
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

3/1 no journal entries

6/1 Premium Expense $10,000

AOCI $10,000

AOCI $2,500
Forward Contract $2,500

Foreign Currency $57,500

Forward Contract 2,500
Cash $60,000

AOCI $7,500
Adjustment to Net Income $7,500

14. C (Option cash flow hedge of forecasted foreign currency transaction)

This is a cash flow hedge of a forecasted transaction. The original cost of the
option is recognized as an Option Expense over the life of the option.

15-17. (Option fair value hedge of a foreign currency firm commitment)

The easiest way to solve problems 15 and 16 is to prepare journal entries for
the option fair value hedge and the firm commitment. The journal entries are
as follows:
9/1/13
Foreign Currency Option $2,000
Cash $2,000
12/31/13
Foreign Currency Option $300
Gain on Foreign Currency Option $300
Loss on Firm Commitment $980.30
Firm Commitment $980.30
[($.79 – $.80) x 100,000 = $1,000 x .9803 = $980.30]
Net impact on 2013 net income:
Gain on Foreign Currency Option $300.00
Loss on Firm Commitment (980.30)
$(680.30)
3/1/14
Foreign Currency Option $700
Gain on Foreign Currency Option $700

9-10
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

Loss on Firm Commitment $2,019.70

Firm Commitment $2,019.70
[($.77 – $.80) x 100,000 = $3,000 – $980.30 = $2,019.70]

Foreign Currency (C$) $77,000

Sales $77,000

Cash $80,000
Foreign Currency (C$) $77,000
Foreign Currency Option 3,000

Firm Commitment $3,000

Adjustment to Net Income $3,000

15-17. (continued)

Net impact on 2014 net income:

Gain on Foreign Currency Option $ 700.00
Loss on Firm Commitment (2,019.70)
Sales 77,000.00
Adjustment to Net Income 3,000.00
$78,680.30
15. B

16. D

17. B Net cash inflow with option ($80,000 – $2,000) $78,000

Cash inflow without option (at spot rate of $.77) 77,000
Net increase in cash inflow $ 1,000

18-20. (Forward contract fair value hedge of a foreign currency firm commitment)

The easiest way to solve problems 18 and 19 is to prepare journal entries for
the forward contract fair value hedge of a firm commitment. The journal
entries are as follows:

3/1 no journal entries

3/31 Forward Contract $1,250

Gain on Forward Contract $1,250
($1,250 – $0)

9-11
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

Loss on Firm Commitment $1,250

Firm Commitment $1,250

Net impact on first quarter net income is $0.

18-20. (continued)

4/30 Loss on Forward Contract $250

Forward Contract $250
[Fair value of Forward Contract is
($.120 – $.118) x 500,000 = $1,000;
$1,000 – $1,250 = $250]
Firm Commitment $250
Gain on Firm Commitment $250
Foreign Currency (pesos) $59,000
Sales [500,000 pesos x $.118] $59,000
Cash [500,000 x $.120] $60,000
Foreign Currency (pesos) $59,000
Forward Contract 1,000
Firm Commitment $1,000
Adjustment to Net Income $1,000

Net impact on second quarter net income is: Sales $59,000 – Loss on Forward
Contract $250 + Gain on Firm Commitment $250 + Adjustment to Net Income
$1,000 = $60,000.

18. A

19. C

20. B Cash inflow with forward contract [500,000 pesos x $.12] $60,000
Cash inflow without forward contract [500,000 pesos x $.118] 59,000
Net increase in cash flow from forward contract $ 1,000

9-12
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

21-22. (Option cash flow hedge of a forecasted foreign currency transaction)

The easiest way to solve problems 21 and 22 is to prepare journal entries for
the option cash flow hedge of a forecasted transaction. The journal entries
are as follows:

11/1/13
Foreign Currency Option $1,500
Cash $1,500

12/31/13
Option Expense $400
Foreign Currency Option $400
(The option has no intrinsic value at 12/31/13 so the entire change in fair
value is due to a change in time value; $1,500 – $1,100 = $400 decrease in
time value. The decrease in time value of the option is recognized as an
expense in net income.)

Option Expense decreases net income by $400.

2/1/14
Option Expense $1,100
Foreign Currency Option 900
Accumulated Other Comprehensive Income (AOCI) $2,000
(Record expense for the decrease in time value of the
option; $1,100 – $0 = $1,100; and write-up option to fair
value ($.40 – $.41) x 200,000 = $2,000 – $1,100 = $900.)

Foreign Currency (BRL) [200,000 x $.41] $82,000

Cash [200,000 x $.40] $80,000
Foreign Currency Option 2,000

Parts Inventory (Cost-of-goods-sold) $82,000

Foreign Currency (BRL) $82,000

Accumulated Other Comprehensive Income (AOCI) $2,000

Adjustment to Net Income $2,000

9-13
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

21-22. (continued)

Net impact on 2014 net income:

Option Expense $ (1,100)
Cost-of-Goods-Sold (82,000)
Adjustment to Net Income 2,000
Decrease in Net Income $ (81,100)

21. B

22. C
23. (10 minutes) (Foreign currency payable -- import purchase)

a. The decrease in the dollar value of the LCU payable from November 1 (60,000
x .345 = $20,700) to December 31 (60,000 x .333 = $19,980) is recorded as a
$720 foreign exchange gain in 2013.
b. The increase in the dollar value of the LCU payable from December 31
($19,980) to January 15 (60,000 x .359 = $21,540) is recorded as a $1,560
foreign exchange loss in 2014.

24. (10 minutes) (Foreign currency receivable – export sale)

a. The ostra receivable decreases in dollar value from (50,000 x $1.05) $52,500
at December 20 to $51,000 (50,000 x $1.02) at December 31, resulting in a
foreign exchange loss of $1,500 in 2013.
b. The further decrease in dollar value of the ostra receivable from $51,000 at
December 31 to $49,000 (50,000 x $.98) at January 10 results in an additional
$2,000 foreign exchange loss in 2014.

25. (10 minutes) (Foreign currency receivable – export sale)

9/15 Accounts Receivable (FCU) [100,000 x $.40] $40,000

Sales $40,000

9/30 Accounts Receivable (FCU) $2,000

Foreign Exchange Gain $2,000
[100,000 x ($.42 – $.40)]

10/15 Foreign Exchange Loss $5,000

Accounts Receivable (FCU)
[100,000 x ($.37 – $.42)] $5,000

Cash $37,000
Accounts Receivable (FCU) $37,000

9-14
Chapter 09 - Foreign Currency Transactions and Hedging Foreign Exchange Risk

26. (10 minutes) (Foreign currency payable -- import purchase)

12/1/13 Inventory $52,800

Accounts Payable (LCU) [60,000 x $.88] $52,800

12/31/13 Accounts Payable (LCU) [60,000 x ($.82 – $.88)] $3,600

Foreign Exchange Gain $3,600

1/28/14 Foreign Exchange Loss $4,800

Accounts Payable (LCU) [60,000 x ($.90 – $.82)] $4,800

Accounts Payable (LCU) $54,000

Cash $54,000

27. (15 minutes) (Determine U.S. dollar balance for foreign currency transactions)

Inventory and Cost of Goods Sold are reported at the spot rate at the date the
inventory was purchased. Sales are reported at the spot rate at the date of sale.
Accounts Receivable and Accounts Payable are reported at the spot rate at the
balance sheet date. Cash is reported at the spot rate when collected and the
spot rate when paid.

a. Inventory [50,000 pesos x 40% x $.17] ..................................................... $3,400

b. COGS [50,000 pesos x 60% x $.17] .......................................................... $5,100
c. Sales [45,000 pesos x $.18]....................................................................... $8,100
d. Accounts Receivable [45,000 – 40,000 = 5,000 pesos x $.21] ................ $1,050
e. Accounts Payable [50,000 – 30,000 = 20,000 pesos x $.21] ................... $4,200
f. Cash [(40,000 x $.19) – (30,000 x $.20)] .................................................... $1,600

28. (25 minutes) (Prepare journal entries for foreign currency transactions)

2/1/13 Equipment $17,600

Accounts Payable (L) [40,000 x $.44] $17,600

4/1/13 Accounts Payable (L) $17,600

Foreign Exchange Loss 400
Cash [40,000 x $.45] $18,000

6/1/13 Inventory $14,100

Accounts Payable (L) [30,000 x $.47] $14,100

8/1/13 Accounts Receivable (L) [40,000 x $.48] $19,200

Sales $19,200

9-15
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Breakfast.
Poached Eggs on Toast, with Anchovy Butter,
404, 146.
Broiled Kingfish, maître d’hôtel, 329.
Hashed Chicken à la Crême, 804.
Crême Renversée, 1252.

Luncheon.
Lobster Cutlets, Victoria Sauce, 366.
Chops Soyer, with Potatoes, 647.
Stuffed Cucumbers, 937.
Chicken Salad, 1044.
Strawberries and Cream.

Dinner.
Little Neck Clams, 300.
Cream of Chicken, 82.
Sardines, 283. Radishes, 292.
Salmon à la Régence, 305.
Roast Tenderloin, Piqué à la Duchesse, 516.
Risotto, 1017.
Chicken Fillets à la Patti, 789.
Artichokes, Florentine, 903.
Punch à la Cardinal, 1306.
Roast Ptarmigans, 862.
Lettuce, Mayonnaise, 1042.
 St. Honoré à la Rose Delmonico, 1212.
Roquefort Cheese.
Coffee, 1349.

Monday, May —.

Breakfast.
Ham Omelet, 462.
Fish Balls, 347.
Calf’s Liver and Bacon, 584.
Potatoes, maître d’hôtel, 985.
Sweet Potatoes, Sautées, 995.
Whipped Cream au Kirsch, 1256.

Luncheon.
Welsh Rarebit, Golden Buck, 295.
Ragout of Mutton aux Pommes, 659.
Spaghetti à l’Italienne, 960.
Frangipani Tarts, 1121.

Dinner.
Cherry Stone Oysters, 298.
Consommé Douglas, 114.
Tomatoes, 288. Anchovies, 284.
North River Shad en Matelote, 332.
Sweetbreads, Soubise, 606.
Beans Panachés, 950.
 Breast of Lamb, Jardinière, 702.
Roast Plovers, 865.
Escarole Salad, 1055.
Preserved Plums, 1343.
Coffee, 1349.

Tuesday, May —.

Breakfast.
Eggs à la Tripe, 419.
Fried Frostfish, 301.
Pig’s Feet, Boston style, 730.
Potato Croquettes, 997.
Corn Fritters, 965.

Luncheon.
Shad’s Roe, sauce Hollandaise, 402, 160.
Minced Beef à la Provençale, 500.
Stuffed Peppers, 975.
String Bean Salad, 1068.
Apple Méringue Pie, 1103.

Dinner.
Little Neck Clams, 300.
Mulligatawney à la Delmonico, 35.
Caviare, 281. Radishes, 292.
Fresh Mackerel, Cream Sauce, 329, 181.
 Lamb Chops à la Robinson, 682.
Sorrel, with Croûtons, 974.
Chicken Curry à l’Espagnole, 793.
Fresh Asparagus, 904.
Roast Snipe, 868.
Doucette Salad, 1054.
Fruit Pudding, 1161.
Coffee, 1349.

Wednesday, May —.

Breakfast.
Omelet à la Provençale, 457.
Fried Porgies, 301.
Broiled Deviled Mutton Kidneys, 715.
Fried Potatoes, 993.
Waffles with Sugar, 1196.

Luncheon.
Oysters à la Baltimore, 388.
Chicken Pot-pie, 757.
Macaroni au Gratin, 955.
Rice Pudding, 1143.

Dinner.
Massachusetts Bay Oysters, 298.
Chicken à la Richmond, 62.
Olives. Lyons Sausage, 286.
Bass, Lobster Sauce, 352, 158.
Boiled Turkey, Egg Sauce, 798.
Spinach, maître d’hôtel, 942.
Sweetbreads aux Gourmets, 612.
Brussels Sprouts, 922.
Roast Fillet of Beef, 516.
Barbe de Capucine Salad, 1038.
Omelet Célestine, 477.
Coffee, 1349.

Thursday, May —.

Breakfast.
Eggs au Beurre noir, 414.
Spanish-mackerel, Vert-pré, 328.
Calf’s Head à la Vinaigrette, 640.
Lima Beans and Cream, 952.
Blackberries and Cream.

Luncheon.
Broiled Trout, Butter sauce, 314.
Corned Beef with Kale-sprouts, 490.
Potatoes à l’Hollandaise, 999.
Herring Salad, 1074.
Baba au Rhum, 1217.
 Dinner.
Small Rockaway Oysters, 298.
Consommé Suédoise, 122.
Mortadella, 287. Radishes, 292.
Kennebec Salmon à la Régence, 305.
Fillet of Beef, Broiled à la Trianon, 507.
Green Peas à l’Anglaise, 978.
Chicken Sauté à la Marengo, 771.
Stuffed Tomatoes, 1023.
Roast Hind Quarter of Spring Lamb, 1361.
Chicory Salad, 1045.
Blackberry Shortcake, 1215.
Coffee, 1349.

Friday, May —.

Breakfast.
Omelet aux Sardines, 468.
Broiled Bluefish, brown Butter, 329, 159.
Pig’s Feet, St. Hubert, 727.
Spaghetti à la Italienne, 960.
Brioche, 1201.

Luncheon.
Crabs à la St. Jean, 371.
Stewed Mutton, Marseillaise, 657.
Salmon Salad, 1066.
 Custard Pie, 1100.

Dinner.
East River Clams, 300.
Oyster Soup, 26.
Olives. Sardines, 283.
Bass à la Chambord, 343.
Escalops of Sweetbreads, Richelieu, 574.
Cauliflower au Gratin, 926.
Squabs en Crapaudine, 819.
String Beans, 948.
Roast Loin of Veal, 585.
Watercress Salad, 1072.
Omelet Soufflée, 474.
Coffee, 1349.

Saturday, June —.

Breakfast.
Eggs à la Bourguignonne, 411.
Haddock, Cream Sauce, 352, 181.
Lamb en Brochette, Colbert, 674, 190.
Fried French Potatoes, 993.
Rice Cake, 1222.

Luncheon.
Broiled Stuffed Deviled Crabs, 370.
 Breaded Veal Cutlets, Tomato sauce, 563.
Macédoine Salad, 1063.
Mille Feuilles, 1223.

Dinner.
Ox-tail à l’Ecossaise, 39.
Tomatoes, 288. Olives.
Lobster à la Bordelaise, 360.
Tenderloin of Pork, Sauce piquante, 741, 203.
String Beans, 984.
Fried Chicken, Cream Sauce, 301, 181.
Stuffed Tomatoes, 1023.
Leg of Lamb, 648.
Lettuce Salad, 1057.
Tapioca Pudding, 1141.
Mazagran à la Gen. Bugeau, 1391.

Sunday, June —.

Breakfast.
Omelet with fresh Asparagus, 458.
Veal Kidneys, Broiled and Deviled, 715.
Broiled Ham, 753.
Fried Oyster-plant, 1021.
Fresh Cherries.
 Luncheon.
Baked Bluefish, 319.
Hashed Chicken en Bordure, 805.
Stuffed Egg-plant, 909.
Timbales à la Schultze, 263.
Raspberry Pie, 1096.

Dinner.
Little Neck Clams, 300.
Cream of Cauliflower, 73.
Caviare, 281. Radishes, 292.
Pompano, maître d’hôtel, 329.
Potatoes, Château, 1009.
Broiled Tenderloin à la Trianon, 507.
Broiled Tomatoes, 1025.
Shells of Sweetbreads à la Dreux, 621.
Punch à la Lalla Rookh, 1308.
Roast Turkey, Cranberry Sauce, 800, 1329.
Chicory Salad, 1045.
Cabinet Pudding à la Sadi-Carnot, 1164.
Swiss Cheese.
Coffee, 1349.

Monday, June —.

Breakfast.
Eggs au Soleil, 415.
 Broiled Black Bass, 329.
Sausages, with White Wine, 735.
Hashed Potatoes, 1002.
Stewed Apricots, 1335.

Luncheon.
Stuffed Deviled Clams, 376.
Corned Beef Hash à la Polonaise, 528.
Oyster-plant à la Poulette, 1019.
Tomato, Mayonnaise Salad, 1071.
Blackberry Tarts, 1119.

Dinner.
Small Rockaway Oysters, 298.
Consommé Napolitaine, 127.
Anchovies, 284. Radishes, 292.
Shad à l’Ecarlate, 326, 247.
Tenderloin Piqué à la Provençale, 518.
Potatoes en Paille, 1014.
Veal Cutlets à la Maréchale, 562.
Stuffed Lettuce, 953.
Roast Squabs, 816.
Doucette Salad, 1054.
Omelet au Kirsch, 476.
Coffee, 1349.
 Tuesday, June —.

Breakfast.
Omelet, with Parsley, 451.
Broiled Bacon, 754.
Hashed Lamb à la Polonaise, 700.
Stewed Carrots and Cream, 927.
Cream Renversée, 1252.

Luncheon.
Broiled Trout à la maître d’hôtel, 314.
Vol-au-Vent à la Financière, 810.
Asparagus à la Tessinoise, 906.
Boiled Apricot Dumplings, 1126.

Dinner.
Massachusetts Bay Oysters, 298.
Mock Turtle, 17.
Lyons Sausage, 286. Olives.
Bass en Matelote, 332.
Sweetbreads à la Duxelle, 608.
Chicken Sauté à l’Hongroise, 772.
Mushrooms on Toast, 914.
Roast Loin of Mutton, 585.
Escarole Salad, 1055.
Rum Cake, 1229.
Coffee, 1349.
 Wednesday, June —.

Breakfast.
Fried Eggs, 412.
Broiled Kingfish, 329.
Minced Beef à la Provençale, 500.
Potatoes à la Hanna, 1012.
Buckwheat Cakes, 1183.

Luncheon.
Welsh Rarebit, Golden Buck, 295.
Shad’s Roe, with Bacon, 402.
Stewed Mutton, with Oyster-plant, 703.
Tomatoes à la Marseillaise, 1029.
Rhubarb Pie, 1085.

Dinner.
Oysters, 298.
Cream of Sorrel, Fermière, 81.
Sardines, 283. Radishes, 292.
Salmon Croquettes, 364.
Broiled Tenderloin of Beef, Nivernaise, 505.
Turnips, with Gravy, 967.
Mutton Chops à la Clichy, 684.
Asparagus à la Vinaigrette, 905.
Roast Chicken, 755.
Watercress Salad, 1072.
Plombière à la Hamilton, 1370.
Coffee, 1349.
 Thursday, June —.

Breakfast.
Omelet Régence, 470.
Picked-up Codfish, 346.
Lamb Steak, with Bacon, 716, 754.
Potato Balls, 996.
Brioches, 1201.

Luncheon.
Trout, Ravigote Sauce, 314, 147.
Tendron of Veal, Morlaisienne, 635.
Beef Salad, 1039.
Peach Pie, 1092.

Dinner.
Oak Island Oysters, 298.
Pot-au-Feu, 54.
Watercress, 1072. Anchovies, 284.
Crawfish à la Bordelaise, 360.
Sirloin à la Stanley, 491, 248.
String Beans à la Bretonne, 949.
Turban of Chicken à la Cleveland, 791.
Cauliflower au Gratin, 926.
Roast Plover, 865.
Romaine Salad, 1064.
Charlottes Panachées, 1300.
Coffee, 1349.
 Friday, June —.

Breakfast.
Eggs à la Polonaise, 445.
Broiled Whitebait, 329.
Beef Tongue, sauce Piquante, 533.
Fried Sweet Potatoes, 993.
Kirsch Jelly, 1319.

Luncheon.
Stuffed Deviled Crabs, 370.
Beefsteak Pie à l’Américaine, 488.
Spinach, with Gravy, 943.
Shrimp Salad, 1067.
Frangipani Tarts, 1121.

Dinner.
Little Neck Clams, 300.
Bouille-à-Baisse, 1.
Celery, 290. Olives.
Bass, Egg Sauce, 352, 161.
Civet of Antelope à la Française, 887.
Spaghetti au Gratin, 961.
Lamb Chops, maison d’or, 683.
Green Peas, 978.
Roasted Squabs, 816.
Barbe de Capucine Salad, 1038.
Peach Pudding à la Richelieu, 1150.
 Coffee, 1349.

Saturday, June —.

Breakfast.
Hominy and Cream, 1034.
Chicken Liver Omelet, 464.
Mutton Chops, with Bacon, 647, 754.
Saratoga Potatoes, 1011.
Rice à la Turque, 1178.

Luncheon.
Frogs’ Legs à la Geo. Merrill, 1372.
Stuffed Breast of Veal, Purée of Peas, 596, 49.
Asparagus à la Tessinoise, 906.
Cranberry Pie, 1104.

Dinner.
Little Neck Clams, 300.
Brunoise, with Rice, 3.
Radishes, 292. Sardines, 283.
Salmon, Oyster Sauce, 303.
Tenderloin of Beef, larded à la Portugaise, 517.
Sorrel, with Eggs, 974.
Salmi of Ptarmigan à la Moderne, 870.
Lima Beans, 952.
Roast Leg of Spring Lamb, 648.
 Lettuce Salad, 1058.
Apple Charlotte, 1167.
Coffee, 1349.

Sunday, June —.

Breakfast.
Scrambled Eggs, with Truffles, 407.
Fried Soles, Tartare Sauce, 320, 207.
Hashed Turkey à la Crême, 804.
Broiled Egg-plant, 908.
Stewed Prunes, 1330.

Luncheon.
Codfish à l’Hollandaise, 317.
Broiled Turkey Legs à la Diable, 766.
Okras, Sautés à la Créole, 1031.
Crab Salad, 1047.
Crême en Mousse au Cognac, 1258.

Dinner.
Little Neck Clams, 300.
Mulligatawney, 34.
Caviare, 28. Radishes, 292.
Broiled Spanish-mackerel, maître d’hôtel, 329.
Cucumber Salad, 289.
Curry of Lamb, with Asparagus-tops, 676.
 Sweetbreads à la Catalan, 616.
Hashed Potatoes au Gratin, 1004.
Roman Punch, 1304.
Roast Tenderloin of Beef, 516.
Tomato, Mayonnaise Salad, 1071.
Strawberry Shortcake, 1214.
Camembert Cheese.
Mazagran à la Gen. Dufour, 1392.

Monday, June —.

Breakfast.
Omelet aux fines Herbes, 451.
Fish Balls, 347.
Brochette of Lamb à la Dumas, 674.
Succotash, 1022.
Milan Cake, 1228.

Luncheon.
Pickerel, with White Wine, 342.
Haricot of Lamb à la Providence, 701.
Stewed Corn, 964.
Herring Salad, 1074.
Maraschino Jelly, 1319.

Dinner.
East River Oysters, 298.
 Consommé Rachel, 123.
Thon, 282. Radishes, 292.
Broiled Pompano, 329.
Potatoes, Windsor, 1008.
Suprême of Chicken à la Bayard, 787.
Green Peas à l’Anglaise, 978.
Beefsteak à la Bordelaise, 491.
Fried Oyster-plant, 1021.
Roast Loin of Veal, 585.
Dandelion Salad, 1049.
Vermicelli Pudding, 1142.
Coffee, 1349.

Tuesday, June —.

Breakfast.
Eggs à la Livingstone, 410.
Broiled Mutton Kidneys, with Bacon, 661.
Potatoes, Saratoga, 1011.
Crême en Mousse au Café, 1253.

Luncheon.
Mussels à la Marinière, 378.
Hashed Turkey en Bordure, 805.
Fried Sweet Potatoes, 993.
Asparagus Salad, 905.
Raspberry Tarts, 1118.
 Dinner.
Mill Pond Oysters, 298.
Mikado, 32.
Tomatoes, 288. Radishes, 292.
Fresh Mackerel, St. Nazaire, 329, 236.
Tenderloin of Beef, Piqué à la Trianon, 507.
Stuffed Peppers, 975.
Sweetbreads à la Montglas, 615.
Roast Squab, 816.
Chicory Salad, 1045.
Baked Apple Dumplings, 1122.
Coffee, 1349.

Wednesday, June —.

Breakfast.
Tomato Omelet, 456.
Shad, maître d’hôtel, 326.
Pig’s Feet à la Boston, 730.
Potatoes, Julienne, 1013.
Raspberries and Cream.

Luncheon.
Scallops Brestoise, 392.
Beefsteak Pie à l’Américaine, 488.
String Beans, 947.
Pineapple Pie, 1087.
 Dinner.
Little Neck Clams, 300.
Beef à l’Anglaise, 5.
Lyons Sausage, 236. Radishes, 292.
Bluefish à la Toulouse, 354.
Minced Beef à la Provençale, 500.
Fricassé of Chicken, with Curry, 792.
Asparagus, sauce Hollandaise, 904.
Roast Beef, 527.
Romaine Salad, 1064.
Peach Water-ice, 1284.
Biscuits à la Cuillère, 1231.
Coffee, 1349.

Thursday, June —.

Breakfast.
Omelet, with Peas, 459.
Porterhouse Steak, with Watercress, 524.
Potatoes, Lyonnaise, 991.
French Pancake, 1186.

Luncheon.
Shad, with Sorrel, 327.
Mutton Chops, Soyer, 647.
Stuffed Peppers, 975.
Jam Omelet, 475.
 Dinner.
Parker Bay Oysters, 298.
Julienne, 27.
Watercress, 1072. Anchovies, 284.
Clam Patties, 387.
Mignons Filets à la Bohémienne, 513.
Succotash, 1022.
Chicken à la Ranhofer, 1363.
Artichokes à la Florentine, 903.
Roast Reed-birds, 877.
Escarole Salad, 1055.
Riz au Lait d’Amandes, 1170.
Coffee, 1349.

Friday, June —.

Breakfast.
Lobster Omelet, 454.
Bluefish au Gratin, 319.
Minced Beef à la Catalan, 502.
Potatoes à la Rice, 1007.
Preserved Apples, 1342.

Luncheon.
Whitebait, 301.
Green Peas, 978.
Porterhouse Steak, Fried Onions, 524, 969.
 Potato Salad, 1073.
Rice and Cream à la Croce, 1296.

Dinner.
Doxie Rockaway Oysters, 298.
Bisque of Crab, 9.
Thon, 282. Radishes, 292.
Kingfish, with White Wine, 342.
Stewed Mutton, with Potatoes, 659.
Asparagus à la Tessinoise, 906.
Salmi of Pigeon à la Walter Scott, 856.
Roast Loin of Veal, 585.
Chicory Salad, 1045.
Pineapple Water-ice, 1283.
Sweet Almond Macaroons, 1210.
Coffee, 1349.

Saturday, June —.

Breakfast.
Omelet Espagnole, 472.
Skate, with black Butter, 325, 159.
Calf’s Liver and Bacon, 584.
Broiled Potatoes, 983.
Fresh Grapes.
 Luncheon.
Broiled Porgies à la Béarnaise, 353.
Sausages à la Gastronome, 740.
String Bean Salad, 1068.
Rhubarb Pie, 1085.

Dinner.
Linn Haven Oysters, 298.
Consommé à l’Africaine, 116.
Caviare, 28. Celery, 290.
Lobster à la Newburg, 359.
Marinated Tenderloin of Beef, Russian Sauce,
511.
Mushrooms on Toast, 916.
Salmi of Duck, with Olives, 827.
Fried Egg-plant, 907.
Roast Spring Lamb, 1361.
Romaine Salad, 1064.
Cold Maraschino Pudding, 1134.
Coffee, 1349.

Sunday, June —.

Breakfast.
Eggs à l’Impératrice, 440.
Broiled Pompano, 329.
Hamburg Steak, Colbert, 526, 190.
 Mashed Potatoes, 998.
Crême en Mousse au Café, 1253.

Luncheon.
Fresh Mackerel, fine Herbs, 331.
Stewed Veal, Marengo, 624.
Stuffed Lettuce, 953.
Tomato, Mayonnaise Salad, 1071.
Stewed Prunes à la Général Dufour, 1330.

Dinner.
Little Neck Clams, 300.
Mutton à l’Ecossaise, 31.
Radishes, 292. Anchovies, 284.
Salmon, en Papillotes, 302.
Saddle of Mutton, Sevigné, 669.
Sweetbreads, with Asparagus-tops, 602, 676.
Punch à la Lorenzo Delmonico, 1303.
Roast Goose, 808.
Lettuce Salad, 1057.
Tutti-frutti, 1293.
Almond Biscuits, 1235.
Mazagran à la General Bugeau, 1391.
 Monday, June —.

Breakfast.
Kidney Omelet, 463.
Hashed Beef à la Portugaise, 501.
Potatoes, Hollandaise, 999.
Fresh Red Currants.

Luncheon.
Soft Clams à la Newburg, 390.
Veal Cutlets à la Maréchale, 562.
String Beans, with Cream, 946.
Peach Pie, 1092.

Dinner.
Rockaway Oysters, 298.
Consommé d’Orléans, 110.
Mortadella, 287. Radishes, 292.
Blackfish, Vert-pré, 328.
Potatoes, Duchesse, 1006.
Hashed Turkey, with Cream, 804.
Risotto, 1017.
Lamb Chops à la Masséna, 687.
Artichokes, Florentin, 903.
Roast Capon, 755.
Lettuce Salad, 1058.
Lemon Water-ice, 1279.
Coffee, 1349.
 Tuesday, June —.

Breakfast.
Poached Eggs on Toast, Anchovy Butter, 404,
146.
Porgies, maître d’hôtel, 329.
Minced Tenderloin à l’Italienne, 500, 188.
Potatoes, Lyonnaise, 991.
Whipped Cream à la Vanille, 1254.

Luncheon.
Sheep’s-head à la Créole, 339.
Mutton Steaks à la Colbert, 716, 190.
Spaghetti à l’Italienne, 960.
Red Currant Pie, 1090.

Dinner.
Clams, 300.
Consommé Paysanne, 53.
Tomatoes, 288. Olives.
Frogs à la Bordelaise, 401, 243.
Croquettes of Lamb, Tomato Sauce, 679, 205.
Beans Panachés, 950.
Stewed Chicken à la Maryland, 785.
Cauliflower au Gratin, 926.
Roast Beef, 527.
Chicory Salad, 1045.
Strawberry and Vanilla Ice-cream, 1274, 1271.
Coffee, 1349.
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