Forward exchange contract designated as a fair value hedge of a foreign$-$currency$-$denominated firm commitment to sell

inventory, strengthening $US

Our U$.$S$.-$based company enters into a "firm commitment" with Ireland$-$based retailer on December $5,2018.$ The firm commitment

requires our company to sell $30,000$ units of an inventory item costing $16\mathrm{.}00$ each to the Irish company. Our company is

contractually committed to ship the inventory $($i$.$e$.,$ title transfers$)$ on March $5,2019,$ with payment in Euros on the same date. Our

company does recurring business with the Irish company, and the firm commitment includes significant monetary penalties for

nonperformance. Also assume, on December $5,2018,$ our company enters into a contract with a foreign currency exchange broker

to sell Euros $($for settlement on March $5,2019)$ to mitigate the risk of exchange rate fluctuation. Our company's functional currency

is the U$.$S$.$ dollar and our forward exchange contract qualifies as a fair value hedge. The relevant exchange rates and related

balances for the period from December $5,2018,$ to March $5,2019,$ are as follows:

a For settlement on March $5,2019$

b Ignore discounting in the computation of fair values.

a$.$ Prepare the journal entries to record the sale and all adjustments required for the firm commitment and forward contract at

December $5,2018,$ December $31,2018,$ and March $5,2019.$

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 For settlement on March $5,2019$

b Ignore discounting in the computation of fair values.

a$.$ Prepare the journal entries to record the sale and all adjustments required for the firm commitment and forward contract at December $5,2018,$ December $31,2018,$ and March $5,2019.$

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

$12/5/18$ Answer

Sales

Answer

$0$

Answer

$0$

Answer

Hedged firm commitment $($liability$)$

Answer

$0$

Answer

$0$

$12/31/18$ Answer

Cash

Answer

$0$

Answer

$0$

Answer

Sales

Answer

$0$

Answer

$0$

$3/5/19$ Answer

Sales

Answer

$0$

Answer

$0$

Answer

Hedged firm commitment $($liability$)$

Answer

$0$

Answer

$0$

To record sale of inventory.

Answer

Sales

Answer

$0$

Answer

$0$

Answer

Hedged firm commitment $($liability$)$

Answer

$0$

Answer

$0$

To record change in value.

Answer

Hedged firm commitment $($liability$)$

Answer

$0$

Answer

$0$

Answer

Sales

Answer

$0$

Answer

$0$

To reclassify firm commitment.

FV Hedge

Date Description Debit Credit

$12/5/18$ Answer

Hedged firm commitment $($liability$)$

Answer

$0$

Answer

$0$

Answer

Sales

Answer

$0$

Answer

$0$

$12/31/18$ Answer

Forward contract $($asset$)$

Answer

$0$

Answer

$0$

Answer

Sales

Answer

$0$

Answer

$0$

$3/5/19$ Answer

Forward contract $($asset$)$

Answer

$0$

Answer

$0$

Answer

Sales

Answer

$0$

Answer

$0$

To record change in value.

Answer

Cash

Answer

$0$

Answer

$0$

Answer

Forward contract $($asset$)$

Answer

$0$

Answer

$0$

To record the net settlement.

b$.$ Reconcile to the forward rate at the forward contract$$s 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 the settlement of the forward contract derivative is:

$Answer

$0$

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

$0$

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

$Answer

$0$

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

$Answer

$0$