Manitoba Exporters Inc. (MEI) sells Inuit carvings to countries throughout the world. On December 1, Year 5, MEI sold 11,000 carvings to a wholesaler in a foreign country at a selling price of 622,000 foreign currency units (FCs) when the spot rate was FC1 = $0.784. The invoice required the foreign wholesaler to remit by April 1, Year 6. On December 3, Year 5, MEI entered into a forward contract with the Royal Bank at the 120-day forward rate of FC1 = $0.824 and the spot rate was still FC1 = $0.784.

The fiscal year-end of MEI is December 31, and on this date the spot rate was FC1 = $0.800 and the forward rate was FC1 = $0.836. The payment from the foreign customer was received on April 1, Year 6, when the spot rate was FC1 = $0.845.

Assume that MEI uses hedge accounting. Also, assume that the forward element and spot elements on the forward contract are accounted for separately.

Required:

(a) Prepare the journal entries for the below items assuming that MEI designates the forward contract as a cash flow 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.)

(i) The sale and the forward contract

December 1, Year 5- Record the sales.

December 3, Year 5- Record the forward contract.

(ii) any adjustments required on December 31

Record to adjust the accounts receivable to closing exchange rate.

Record to offset exchange gain or loss on spot and forward contracts

Record amortization gain or loss from premium on forward contract over 4 months

iii. the cash received in Year 6

Record to adjust the accounts receivable to the spot rate.

Record to offset exchange gain or loss on spot and forward contracts.

Record amortization gain or loss from premium on forward contract over 4 months.

Record the receipt of cash

Record the receipts of cash from bank.