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Manitoba Exporters Inc. (MEl) sells Inuit carvings to countries throughout the world. On December 1, Year 5, MEl sold 10,000 carvings to a wholesaler in
Manitoba Exporters Inc. (MEl) sells Inuit carvings to countries throughout the world. On December 1, Year 5, MEl sold 10,000 carvings to a wholesaler in a forelgn country at a selling price of 800,000 foreign currency units (FC) when the $pot rate was FC1=$0.701. The invoice required the foreign wholesaler to remit by April 1, Year 6. On December 3. Year 5. MEl entered into a forward contract with the Royai Bank to sell FC800,000 at the 120-day forward rate of FCI =$0.741 when the spot rate was still FCl=$0.701. Hedge accounting is notapplied. The fiscal year-end of MEl is December 31, and on this date the spot rate was FCl=$0.737 and the forward rate was FCl=$0.752. The payment from the foreign customer was recelved on April 1. Year 6, when the spot rate was FC1 $0.802. Required: (a) Prepore the joumal entries to record (tn cases where no entry is required, please select the option "No journal entry required" for your answet to grade correctly. Leave no cells blank - be certain to enter "O" wherever required.) (i) The sale and forward contracts on December 1 and 3 , Year 5 (ii) Any adjustments required on December 31 (iii) The cash recelved and settlement of the contracts in Year 6 (b) Now assume that a discount rate of 6% per annum, or 0.5% per month, is applied when determining the fair value of the forward contract at December 31, Year 5. Prepare the journal entries to record (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. 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 forward contracts on December 1 and 3 , Year 5 (in) Any adjustments required on December 31 (i) The cash recelved and settiement of the contracts in Year 6
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