Question

Merit & Family purchased engines from Canada for 34,000 Canadian dollars on March 10 with payment due on June 8. Also, on March 10, Merit acquired a 90-day forward contract to purchase 34,000 Canadian dollars at C$1 = $0.50. The forward contract was acquired to manage Merit & Family’s exposed net liability position in Canadian dollars, but it was not designated as a hedge. The spot rates were

March 10	C$1	=	$	0.49
June 8	C$1	=	$	0.52

Required:
Prepare journal entries for Merit & Family to record the purchase of the engines, entries associated with the forward contract, and entries for the payment of the foreign currency payable. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1 Record the foreign purchase of the engines.

2 Record the entry for the 90-day forward exchange contract signed to receive Canadian dollars.

3 Record the entry to revalue the foreign currency receivable to the current equivalent U.S. dollar value.

4 Record the entry to revalue the foreign currency accounts payable to the current U.S. dollar value.

5 Record the payment of U.S. dollars to an exchange broker for the forward contract.

6 Record the receipt of Canadian dollars from the exchange broker.

7 Record the settlement of the foreign currency payable.

Answer 1

Anscver Tournal entries Record the fovelgn punchase of the engines Imutory oi punch ases - c 34000 x o. 49 $ 16660 Record the enly for 90- day forcond czchange conliact Canadian dollars Signed to receive forcoand exchang c contract to reccive c$ 34000 x $0.50 $ 14000 O Record the ertiy to revalue the foreign cuieny receivable to the curorent equivalent U.$. dollan value -for eign auaery receivable from cxchange broker = o$ 34000 x (tos2-050) E 34000 x O.02 $ 680 Record the enby to revalue the foreign Cuworeny accounts payable to dhe Current dollan value U.S Revalue foreign cuvieny receivable to cuvrent cquivlent

Page No @ •No (d - c$ 34000 x(to.5a - 40.49) Зчо00 х о.03 $ 1020 O Record ihe payment of U.s dollans to an excharge brohen for the forcord contiact Dollam papable to encharge brokon e ce 3ho00 x $0.50 1н0о0 Record the receipt of cariadian dollans from the exchange broker forcign Cursengy sreceivable . from exchange brohe c$ 34000 x$0.52 17680 the foreign aurenky payable Record the Bebtlement of Accounb payable=Cc$) 34000 x $0.52 s 14680

No13, SANO Dale Debit Panticulan Gredit 1 Manch to Inventory or purchases 16660 Accounts payable (e4) 1666 O foreign rece ivalle from exchange broken (ct) 14000 Curi en ty Dollans payable to eachange broken (A). 17000 * Junc8 forcign curmercy receivable from cachange bro 680 CuI -ker ) foreign curnency transaction gain. 680 foreign aureny transachion loss 1030 Accounts payable co$) 1020 15 Dollars payable to exchange broken 1 4000 cash 14000 foreign arsengy unito (c4) 14680 fa cign Curency receivable fromm eachange bioke (e#) 17680 Accounb paynble (o) 146 80 foreign cuoneny unita e) (&ettle foreign. cuoieney payable) 17680