E 12-4 Accounting for foreign currency–denominated purchases Zip purchased merchandise from Tas of Japan on November 1, 2016, for 10,000,000 yen, payable on December 1, 2016.

The spot rate for yen on November 1 was $0.0075, and on December 1 the spot rate was $0.0076.

REQuIRED 1. Did the dollar weaken or strengthen against the yen between November 1 and December 1, 2016? Explain.

2. On November 1, 2016, at what amount did Zip record the account payable to Tas?

3. On December 1, 2016, Zip paid the 10,000,000 yen to Tas. Prepare the journal entry to record settlement of the account on Zip’s books.

4. If Zip had chosen to hedge its exposed net liability position on November 1, would it have entered a forward contract to purchase yen for future receipt or to sell yen for future delivery? Explain.