Hull Manufacturing Corp. (HMC), a Canadian company, manufactures instruments used to measure the moisture content of barley and wheat. The company sells primarily to the domestic market, but in Year 3, it developed a small market in Argentina. In Year 4, HMC began purchasing semi-finished components from a supplier in Romania. The management of HMC is concerned about the possible adverse effects of foreign exchange fluctuations. To deal with this matter, all of HMCs foreign-currency-denominated receivables and payables are hedged with contracts with the companys bank. The year-end of HMC is December 31.

The following transactions occurred late in Year 4:

• On October 15, Year 4, HMC purchased components from its Romanian supplier for 815,000 Romanian leus (RL). On the same day, HMC entered into a forward contract for RON815,000 at the 60-day forward rate of RON1 = $0.423. The Romanian supplier was paid in full on December 15, Year 4.
• On December 1, Year 4, HMC made a shipment to a customer in Argentina. The selling price was 2,515,000 Argentinean pesos (ARS), with payment to be received on January 31, Year 5. HMC immediately entered into a forward contract for ARS2,515,000 at the two-month forward rate of ARS1 = $0.241.

During this period, the exchange rates were as follows:

	Spot Rates	Forward Rates
October 15, Year 4	RON1 = $0.410
December 1, Year 4	ARS1 = 0.264
December 15, Year 4	RON1 = $0.402
December 31, Year 4	ARS1 = $0.248	ARS1 = $0.237

Hedge accounting is not adopted.

Required:

(a) Prepare the Year 4 journal entries to record the transactions described above and any year-end adjusting entries.

• 1

  Record the purchase of inventory.

• 2

  Record the forward contract entered for Romanian leus

• 3

  Record the forward contract entered for Argentinean pesos

• 4

  Record the forward contact.

• 5

  Revalue accounts payable at fair value.

• 6

  Revalue forward contract at fair value.

• 7

  Record the receipt from bank.