P 13-7 Foreign currency hedge, anticipated sale Bat, a U.S. corporation, anticipates a contract based on December 2, 2016, discussions to sell heavy equipment to Ram of Scotland for 500,000 British pounds. The equipment is likely to be delivered and the amount collected on March 1, 2017.

In order to hedge its anticipated commitment, Bat entered into a forward contract on December 2 to sell 500,000 British pounds for delivery on March 1. The forward contract meets all the conditions of ASC Topic 815 for a cash-flow hedge of an anticipated foreign currency commitment.

A 6 percent interest rate is appropriate. The forward contract is settled net.

Exchange rates for British pounds on selected dates are as follows:

British Pounds 12/2/16 12/31/16 3/1/17 Spot rate $1.7000 $1.7050 $1.7100 Forward rate for March 1, 2017, delivery $1.6800 $1.6900 $1.7100 REQuIRED: Prepare the necessary journal entries on Bat’s books to account for:

1. The forward contract on December 2, 2016.