B. Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 242,000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare journal entries to account for the import purchase and foreign currency forward contract.

Journal Entry (JE) 1.

8/15 Record the purchase of 1,100 cases of Oktoberfest-style beer from a German Supplier

JE 2.

9/1 Record entry for the forward contract entered into.

No journal entry required.

JE 3.

9/30 Record the entry to adjust the value of the euros to the new spot rate.

JE 4.

9/30 Adjust the forward contract to fair value.

JE 5.

9/30 To record a foreign exchange loss on the forward contract to offset the foreign exchange gain on the accounts payable.

JE 6.

9/30 Record the foreign exchange loss for the third quarter.

JE 7.

10/15 Record the entry for gain or loss on the forward contract on the payment date when the spot exchange rate is $1.18 per Euro.

JE 8.

10/15 Record the change in the fair value of the forward contract on October 15 when the spot rate is $1.18 per Euro

JE 9.

10/15 To record a foreign exchange loss on the forward contract to offset the foreign exchange gain on the accounts payable.

JE 10.

10/15 Record the foreign exchange loss for the fourth quarter.

JE 11.

10/15 Record purchase of foreign currency to make payment to German supplier.

JE 12.

10/15 Record payment made to German supplier on October 15 when the spot rate is $1.18 per Euro.

JE 13.

10/15 Record the transfer of inventory to cost of goods sold.

Pacifico Company, a U.S.-based importer of beer and wine, purchased 1,100 cases of Oktoberfest-style beer from a German supplier for 242,000 euros. Relevant U.S. dollar exchange rates for the euro are as follows: The company closes its books and prepares third-quarter financial statements on September 30