Equitable Diversity International Inc. (EDI) buys and sells artwork from all over the world. On September 1, Year 5, EDI agreed to purchase some paintings from a seller in Mexico at a price of 500,000 Mexican pesos (MXN) when the spot rate was MXN1 = $0.064. EDI took delivery of the paintings on December 1, Year 5 when the spot rate was MXN1 = $0.077. The invoice required EDI to make payment by April 1, Year 6.

The fiscal year-end of EDI is December 31, and on this date the spot rate was MXN1 = $0.075. EDI made payment on April 1, Year 6, when the spot rate was MXN 1 = $0.060.

Worried that the Canadian dollar may depreciate relative to the MXN, on December 3, Year 5, EDI decided to buy a forward contract from the Royal Bank at the 120-day forward rate of MXN1 = $0.079 when the spot rate was still MXN1 = $0.077. On December 31, Year 5, the forward rate with maturity on April 1, Year 6 was MXN1=$0.078. No hedge accounting is applied.

(i) Show all the journal entries to record both the purchase and the forward contracts for both Year 5 and Year 6

a. Record the purchase of forward contract from the Royal Bank at the 120-day forward rate of MXN1 = $0.079 when the spot rate was still MXN1 = $0.077.

b. Record the gain on loss on the cravings on December 31, Year 5.

c. Record the gain on loss on the forward contract on December 31, Year 5.

d. Record the gain on loss on the cravings on April 1, Year 6.

e. Record the gain on loss on the forward contract on April 1, Year 6.

f. Record the settlement of forward contract in cash on April 1, Year 6.

g. Record the payment for purchase of cravings in cash on April 1, Year 6.