Merele Corp., based in the US$,$ sold inventory for $500,000$ Euro to Hacker Co$.$ on December $2,$

The customer will pay March $1,2009,$ payable in Euro. On $12/2/2008,$ Merele entered

into a $90-$day forward contract to hedge the receivable from Hacker. The following exchange

rates apply:

a$)$ Assume the Forward was designated as a cash flow hedge and Merele's incremental borrowing

rate is $6\%$ giving a $60-$ day present value factor of $\mathrm{.}9901.$ Give all entries related to these

transactions and date the entries.

b$)$ Assume the Forward was designated as a fair value hedge. Give all entries for these

transactions and date the entries.