Hedged Forecasted Purchase

Constellation Brands, a U.S. company, purchases merchandise from a German supplier on a regular basis. On April 1, 2016, Constellation purchased ?10,500 for delivery on June 30, 2016, in anticipation of an expected purchase of merchandise for ?10,500 at the end of June. The forward contract was a qualified hedge of a forecasted transaction. Constellation took delivery of the merchandise, settled the forward contract, and paid the German supplier ?10,500 on June 30, 2016. The merchandise was subsequently sold in the U.S. on July 12, 2016, for $14,250 in cash. Relevant exchange rates ($/?) are as follows:

Forward rate for delivery Spot rate June 30, 2016 April 1, 2016 $ 1.32 $1.30 June 30, 2016 1.36 Prepare the journal entries made by Constellation Brands on June 30 and July 12 concerning the above events. Assume Constellation Brands is a calendar-year company, and records cost of goods sold at the time of sale. General Journal Date Description Debit Credit 06/30/16 C O 0 To record increase in fair value of forward contract. 0 Investment in forward contract O O O To record settlement of forward contract. O O O To record delivery of merchandise and payment to supplier. 07/12/16 O O O O To record merchandise sale. Other comprehensive income ooo O O To record cost of sale