Assume that a company desires to acquire the Japanese rights to a website, which will then be branded with its products for sale in Japan. Assume the company acquires those rights on January 1, 2016, from a Japanese distributor and agrees to pay 12,000,000 yen per year for those rights. Quarterly payments are due March 31, June 30, September 30, and December 31 each year. On January 1, 2016, assume the yen is worth $0.00891.
Required
1. Prepare the journal entry to record the Internet rights purchased on January 1, 2016.
2. Prepare the journal entries to record the payments on March 31, June 30, September 30, and December 31, 2016. The value of the yen on those dates follows.
3. How can the company protect itself from unanticipated gains and losses from currency translation if all of the payments are specified to be paid in yen?
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