E 11-10 : Foreign Currency Transactions: Hedging and Hedge Accounting Revisions: (1) Assume that Pumped Up Company purchased inventory, instead of equipment. (2) Assume that, on 3/1/X8, Pumped Up sold all the inventory bought for US$100,000 cash. Part I: Forward contract is NOT designated as a hedge a. Entries: Foreign Currency Transaction (Import) Forward Contract 12/16/X7 For inventory purchase, show work: 12/31/X7 For year-end adjustment, show work: For year-end adjustment, show work: 2/14/X8 To re-value A/P (SFr), show work: To re-value forward, show work: To pay off A/P (SFr), show work: To exercise forward, show work: 3/1/X8 b. Foreign currency transaction gain loss (circle one) to be reported in 20X7 income statement = $___________________________________________________________________ c. Foreign currency transaction gain loss (circle one) to be reported in 20X8 income statement = $____________________________________________________________________ d. Total foreign currency transaction gain loss (circle one) to be reported in 20X7 and 20X8 = $_____________________________ = Forward premium discount (circle one) at 12/16/ X7 e. Gross profit to be reported in 20X8 income statement = $_____________________________________________________________________ f. Overall effect of these transactions on net income from 20X7 to 20X8 = $______________________________________________________________________