Journal Entry 1) 09/01 - Record the purchase of 2,000 cases of Oktoberfest-style beer from a German supplier.

Journal Entry 1) 09/01 - Record entry for the forward contract entered into.

Journal Entry 1) 09/30 - Record the entry to adjust the value of the euros receivable to the new spot rate.

Journal Entry 1) 09/30 - Record the entry to adjust the value of the euros receivable to the new spot rate.

Journal Entry 1) 09/30 - To record a foreign exchange loss on the forward contract to offset the foreign exchange gain on the accounts payable.

Journal Entry 1) 10/15 - Record the entry for gain or loss on the forward contract on the payment date when the spot exchange rate is $1.58 per Euro.

Journal Entry 1) 10/15 - Record the change in the fair value of the forward contract on October 15 when the spot rate is $1.58 per Euro.

Journal Entry 1) 10/15 - To record a foreign exchange loss on the forward contract to offset the foreign exchange gain on the accounts payable.

Journal Entry 1) 10/15 - Record purchase of foreign currency to make payment to German supplier.

Journal Entry 1) 10/15 - Record payment made to German supplier on October 15 when the spot rate is $1.58 per Euro.

Problem 7-42 (Algo) (LO 7-2, 7-7, 7-8) Pacifico Company, a U.S.-based importer of beer and wine, purchased 2,000 cases of Oktoberfest-style beer from a German supplier for 600.000 euros. Relevant U.S. dollar exchange rates for the euro are as follows: Call Option Premium Forward Rate for October 15 Date Spot Rate to October 15 (strike price $1.50) August 15 $1.5e $1.56 $9.95 September 30 1.55 1.59 0.06 October 15 1.58 1.58 (spot) N/A The company closes its books and prepares third-quarter financial statements on September 30. .. Assume that the beer arrived on August 15. and the company made payment on October 15. There was no attempt to hedge the exposure to foreign exchange risk. Prepare journal entries to account for this import purchase. b. Assume that the beer arrived on August 15. and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 600.000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare journal entries to account for the import purchase and foreign currency forward contract. c. Assume that the company ordered the beer on August 15. The beer arrived and the company paid for it on October 15. On August 15, the company entered into a two-month forward contract to purchase 500.000 euros. The company designated the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate. Forward points are not excluded in assessing hedge effectiveness. Prepare journal entries to account for the foreign currency forward contract, foreign currency firm commitment, and import purchase. d. Assume that the company ordered the beer on August 15. The beer arrived and the company paid for it on October 15. On August 15, the company purchased a two-month call option on 600.000 euros. The company designated the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Prepare journal entries to account for the foreign currency option, foreign currency firm commitment, and import purchase. e. Assume that, on August 15. the company forecasted the purchase of beer on October 15. On August 15, the company acquired a two-month call option on 600.000 euros. The company designated the option as a cash value hedge of a forecasted foreign currency transaction. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Prepare journal entries to account for the foreign currency option and import purchase. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 500.000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare journal entries to account for the import purchase and foreign currency forward contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.) Show less Problem 7-42 (Algo) (LO 7-2, 7-7, 7-8) Pacifico Company, a U.S.-based importer of beer and wine, purchased 2,000 cases of Oktoberfest-style beer from a German supplier for 600.000 euros. Relevant U.S. dollar exchange rates for the euro are as follows: Call Option Premium Forward Rate for October 15 Date Spot Rate to October 15 (strike price $1.50) August 15 $1.5e $1.56 $9.95 September 30 1.55 1.59 0.06 October 15 1.58 1.58 (spot) N/A The company closes its books and prepares third-quarter financial statements on September 30. .. Assume that the beer arrived on August 15. and the company made payment on October 15. There was no attempt to hedge the exposure to foreign exchange risk. Prepare journal entries to account for this import purchase. b. Assume that the beer arrived on August 15. and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 600.000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare journal entries to account for the import purchase and foreign currency forward contract. c. Assume that the company ordered the beer on August 15. The beer arrived and the company paid for it on October 15. On August 15, the company entered into a two-month forward contract to purchase 500.000 euros. The company designated the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate. Forward points are not excluded in assessing hedge effectiveness. Prepare journal entries to account for the foreign currency forward contract, foreign currency firm commitment, and import purchase. d. Assume that the company ordered the beer on August 15. The beer arrived and the company paid for it on October 15. On August 15, the company purchased a two-month call option on 600.000 euros. The company designated the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Prepare journal entries to account for the foreign currency option, foreign currency firm commitment, and import purchase. e. Assume that, on August 15. the company forecasted the purchase of beer on October 15. On August 15, the company acquired a two-month call option on 600.000 euros. The company designated the option as a cash value hedge of a forecasted foreign currency transaction. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Prepare journal entries to account for the foreign currency option and import purchase. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 500.000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare journal entries to account for the import purchase and foreign currency forward contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.) Show less