1. On December 1, 2008, a U.S. firm contracts to sell equipment (with an asking price of 10,000 pesos) in Mexico. The firm will take delivery and will pay for the equipment on March 1, 2009.

2. On December 1, 2008, the company enters into a forward contract to sell 10,000 pesos for $9.48 on March 1, 2009.

3. Spot rates and the forward rates for March 1, 2009, settlement were as follows (dollars per peso):

Spot Rate Forward Rate

December 1, 2008 $9.54 $9.48

Balance sheet date (12/31/08) 9.49 9.44

March 1, 2009 9.47

4. On March 1, the equipment was sold for 10,000 pesos. The cost of the equipment was $40,000.

Required:

Prepare all journal entries needed on December 1, December 31, and March 1 to account for the forward contract, the firm commitment, and the transaction to sell the equipment.