Forward exchange contract designated as a cash flow hedge of a foreign-currency-denominated forecasted sale of inventory, strengthening $US

On October 15, 2018, our U.S.-based company received a cancelable purchase order from a Luxembourg-based retailer. The purchase order states that our company will sell to the Luxembourgish company, on February 1, 2019, 70,000 units of an inventory item with a sales price of 11.00 each. The purchase order also specifies that the Luxembourgish company will make payment in Euros on that same date. Our company does recurring business with the Luxembourgish company; however, the cancelable purchase order includes no monetary penalties for nonperformance. Also, on October 15, 2018, our company entered into a contract with a foreign currency exchange broker to sell 770,000 (for settlement on February 1, 2019) to mitigate the risk of exchange rate fluctuation from this forecasted sale. We will receive $1.23 per 1, which is the forward rate on October 15, 2018, for settlement on February 1, 2019. Our companys functional currency is the U.S. dollar and our forward exchange contract qualifies as a cash flow hedge. The relevant exchange rates and related balances for the period from October 15, 2018, to February 1, 2019, are as follows:

				DerivativeForward
Date	Spot Rate ($US = 1)	Forecasted Sale Transaction	Forward Ratea ($US = 1)	FV Asset (Liability)b	Change in FV
October 15, 2018	1.26		1.23
December 31, 2018	1.21		1.20	$23,100	$23,100
February 1, 2019	1.19	$916,300	1.19	30,800	7,700

^a For settlement on February 1, 2019

^b Ignore discounting in the computation of fair values.

a. Prepare the journal entries to record the sale and all adjustments required for the forecasted sale and forward contract at October 15, 2018, December 31, 2018, and February 1, 2019.

Note: If no entry is required, select "No entry" as your answers under Description and leave the debit and credit answers blank (zero).

Hedged Transaction

Date	Description	Debit	Credit
10/15/18		Answer	Answer
		Answer	Answer
12/31/18		Answer	Answer
		Answer	Answer
2/1/19		Answer	Answer
		Answer	Answer

FV Hedge

Date	Description	Debit	Credit
10/15/18		Answer	Answer
		Answer	Answer
12/31/18		Answer	Answer
		Answer	Answer
2/1/19		Answer	Answer
		Answer	Answer
	To record change in value.
		Answer	Answer
		Answer	Answer
	To record the net settlement.
		Answer	Answer
		Answer	Answer
	To record reclassification.

b. Reconcile to the forward rate at the forward contracts inception the net cash received for both the sale of goods and the settlement of the forward-contract derivative.

Net cash received for sale of goods and settlement of the forward contract derivative is:

$Answer

c. What amount of sales was recognized in the quarter ending December 31, 2018?

Note: Do not use a negative sign with any of your answers below.

$Answer

What amount of sales was recognized in the quarter ending March 31, 2019?

$Answer

What is the total amount of sales recognized across the quarters ending December 31, 2018, and March 31, 2019?

$Answer