Question
Hamilton Importing Corp. (HIC) imports goods from countries around the world for sale in Canada. On December 1, Year 3, HIC purchased 11,700 watches from
Hamilton Importing Corp. (HIC) imports goods from countries around the world for sale in Canada. On December 1, Year 3, HIC purchased 11,700 watches from a foreign wholesaler for DM617,000 when the spot rate was DM1 = $0.758. The invoice called for payment to be made on April 1, Year 4. On December 3, Year 3, HIC entered into a forward contract with the Royal Bank at the 120-day forward rate of DM1 = $0.798. Hedge accounting is not applied.
The fiscal year-end of HIC is December 31. On this date, the spot rate was DM1 = $0.774 and the 90-day forward rate was DM1 = $0.803. The payment to the foreign supplier was made on April 1, Year 4, when the spot rate was DM1 = $0.819.
Required:
(a) Prepare the journal entries required in Year 3 and Year 4, assuming that hedge accounting is not applied. (In cases where no entry is required, please select the option "No journal entry required" for your answer to grade correctly. Leave no cells blank - be certain to enter "0" wherever required.)
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