Item 2

On October 1, Year 6, Versatile Company contracted to sell merchandise to a customer in Switzerland at a selling price of CHF574,000. The contract called for the merchandise to be delivered to the customer on January 31, Year 7, with payment due on delivery. On October 1, Year 6, Versatile arranged a forward contract to deliver CHF574,000 on January 31, Year 7, at a rate of CHF1 = $1.28. Versatiles year-end is December 31.

The merchandise was delivered on January 31, Year 7, and CHF574,000 were received and delivered to the bank.

Exchange rates were as follows:

	Spot Rates	Forward Rates**
October 1, Year 6	CHF1 = $1.26	CHF1 = $1.28
December 31, Year 6	CHF1 = $1.29	CHF1 = $1.30
January 31, Year 7	CHF1 = $1.27	CHF1 = $1.27

**For contracts expiring on January 31, Year 7.

Required:

(c) Prepare the journal entries (using net method) that Versatile should make to record the events described, assuming that the forward contract is designated as a fair value hedge. (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.)

Date	General Journal	Debit	Credit
October 1, Year 6	(Click to select) Payable to bank Cash Other comprehensive income Equipment Land Exchange loss Receivable from bank Commitment receivable No journal entry required
	(Click to select) No journal entry required Exchange loss Payable to bank Other comprehensive income Receivable from bank Land Equipment Commitment receivable Cash
	Record the forward contract.
December 31, Year 6	(Click to select) Commitment receivable Land Other comprehensive income Payable to bank Cash Equipment Exchange gains and losses No journal entry required Patents
	(Click to select) Loan payable No journal entry required Accounts payable Forward contract Bills payable Sales Exchange gain Notes payable Interest receivable
	Record the adjustment of forward contract to forward rate.
	(Click to select) Accounts receivable Inventory Cash Land No journal entry required Purchase Exchange loss Receivable from bank Commitment receivable
	(Click to select) Bills payable No journal entry required Interest receivable Exchange gains and losses Sales Loan payable Notes payable Accounts payable Payable to bank
	Record the adjustment of upcoming accounts receivable value to the forward rate.
January 31, Year 7	(Click to select) Accounts receivable No journal entry required Cash (CHF) Inventory Receivable from bank Purchase Exchange loss Equipment Land
	(Click to select) Loan payable Exchange gain Bills payable No journal entry required Interest receivable Sales Notes payable Accounts payable Payable to bank
	Record the sales.
	(Click to select) Equipment No journal entry required Purchase Inventory Forward contract Land Accounts receivable Exchange loss Receivable from bank
	(Click to select) Sales Exchange gains and losses Bills payable Interest receivable Accounts payable No journal entry required Notes payable Loan payable Payable to bank
	Record the adjustment of forward contract to forward rate.
	(Click to select) Receivable from bank Exchange gains and losses Accounts receivable Cash Equipment Land Purchase Inventory No journal entry required
	(Click to select) Bills payable Commitment receivable Loan payable Notes payable Sales Exchange gain Accounts payable No journal entry required Payable to bank
	Record the adjustment of upcoming accounts receivable value to the forward rate.
	(Click to select) Exchange loss Accounts receivable Cash Purchase Commitment receivable Receivable from bank Inventory No journal entry required Equipment
	(Click to select) Notes payable Sales No journal entry required Loan payable Bills payable Exchange gain Payable to bank Accounts payable Interest receivable
	Record to clear other commitment receivable to sales account.
	(Click to select) Exchange loss Inventory Land Purchase Accounts receivable Equipment Cash Payable to bank No journal entry required
	(Click to select) Bills payable Exchange gain No journal entry required Interest receivable Sales Notes payable Loan payable Forward contract Accounts payable
	(Click to select) Interest receivable Loan payable Sales Payable to bank Notes payable No journal entry required Accounts payable Cash (CHF) Bills payable
	Record the forward contract with bank.

(d) Prepare a partial trial balance of the accounts used as at December 31, Year 6. (Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response.)

Partial trial balance
December 31, Year 6
Account	Debit	Credit
(Click to select) Land Commitment receivable Receivable from bank Purchase Accounts receivable Inventory Equipment	$	$
(Click to select) Inventory Cash Accounts receivable Land Purchase Forward contract Equipment	$	$
(Click to select) Receivable from bank Equipment Inventory Purchase Exchange gains and losses Equipment Accounts receivable Land	$	$