GIVENS:

-On October 1, 2016 USA Company sold some chairs to Mexico Company for 500,000 pesos when the pesowas worth 10 cents.Payment is due April 1, 2017.

-On October 2nd, USA enters into a forward contract when the 6 month forward price was 1 peso = 9 cents. Use 12% for interest.

-On December 31, the peso is worth 8 cents. The 3 month forward rate is 1 peso = 7 cents.

-On April 1, the peso is worth 11 cents and Mexico Company pays its bill.

REQUIRED:

MAKE ALL THE NECESSARY JOURNAL ENTRIES FOR USA COMPANY IN 2016 AND 2017. Remember, USA entered into a covered forward contract on October 2nd.