Forward exchange contract designated as a fair value hedge of a foreign$-$currency$-$denominated

firm commitment to purchase equipment, strengthening $$U{S}_{{?}_{?}}$

On November $5,2018,$ our company enters into a firm commitment to purchase equipment for delivery

on March $20,2019,$ in Euros $().$ The price of the equipment is fixed at $650,000$ with payment due on

delivery. We are concerned that the $US may weaken vis$--$vis the Euro and, on the same date, we enter

into a foreign currency forward contract with a foreign currency broker to buy $650,000$ on March $20,$

We will pay $$1\mathrm{.}36$ per $1,$ which is the current forward rate for settlement on March $20,2019.$ We

designate the foreign currency forward contract as a fair value hedge of our risk of changes in the fair

value of the firm commitment resulting from changes in the $\frac{\text{\$}}{}$ exchange rate. Our company's

functional currency is the $$S.$ The relevant spot and forward exchange rates during this time period are

as follows:

a Eor settlement on March $20,2019$

${?}^b$ We ignore discounting in the computation of fair values.

a$.$ Prepare the journal entries to record the purchase and all adjustments required for the firm

commitment, forward contract, and equipment purchase at November $5,2018,$ December $31,2018,$ and

March $20,2019.$

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

b$.$ Reconcile to the forward rate at the forward contract's inception the net cash paid for both the

equipment purchase and the settlement of the forward$-$contract derivative.

Note: Do not use a negative sign with your answer.

Net cash paid for equipment purchase and settlement of the forward contract derivative is:

$Answer