On December 1, 20X1, Micro World Inc. entered into a 120-day forward contract to purchase 110,000 Australian dollars (A$). Micro Worlds fiscal year ends on December 31. The direct exchange rates follow:

Date	Spot Rate				Forward Rate for March 31, 20X2
December 1, 20X1		$	0.600			$	0.609
December 31, 20X1			0.610				0.612
January 30, 20X2			0.608				0.605
March 31, 20X2			0.602

Required: Prepare all journal entries for Micro World Inc. for the following independent situations: a. The forward contract was to manage the foreign currency risks from the purchase of furniture for A$110,000 on December 1, 20X1, with payment due on March 31, 20X2. The forward contract is not designated as a hedge. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

- Record the foreign currency payable

- Record the forward exchange contract signed to manage the exposed foreign currency payable

- Record the revaluation of the foreign currency payable to the equivalent U.S. dollar value

- Record the revalutation foreign currency receivable

- Record the revaluation of the foreign currency receivable to the current U.S. dollar equivalent

- Record the revalution of the foreign currency receivable

- Record the revaluation of the foreign currency payable

- Record the delivery of U.S. dollars to an exchange broker as required by the forward contract

- Record the reciept of A $110,000 from the exchange broker in accordance with the forward contract

- Record the delivery of A $110,000 to a creditor

b. The forward contract was to hedge a firm commitment agreement made on December 1, 20X1, to purchase furniture on January 30, with payment due on March 31, 20X2. The derivative is designated as a fair value hedge. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1)Record the 120-day forward contract signed to hedge the foreign currency commitment to purchase the furniture on January 30 for A$110,000.

2)Record the revaluation of the foreign currency receivable to fair value.

3)Record the gain or loss on the financial instrument aspect of the firm commitment.

4)Record the revaluation of the foreign currency receivable to the current U.S. dollar equivalent.

5)Record the gain or loss on the financial instrument aspect of the firm commitment.

6)Record the acquisition of the furniture initially committed to on December 1, 20X1.

7)Record the revaluation of the foreign currency receivable.

8)Record the revaluation of the foreign currency payable.

9)Record the delivery of U.S. dollars to an exchange broker.

10)Record the receipt of A$110,000 from the broker in accordance with the forward contract signed on December 1.

11)Record the delivery of A$110,000 to foreign creditor.

c. The forward contract was to hedge an anticipated purchase of furniture on January 30. The purchase took place on January 30 with payment due on March 31, 20X2. The derivative is designated as a cash flow hedge. The company uses the forward exchange rate to measure hedge effectiveness. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1)Record the 120-day forward contract signed as a cash flow hedge of the forecasted foreign currency transaction of the purchase of furniture on January 30 for A$110,000.

2)Record the revaluation of the foreign currency receivable to fair value and record OCI for the effective portion of the change in fair value of the derivative designated as a cash flow hedge.

3)Record the revaluation of the foreign currency receivable to the current U.S. dollar equivalent and record OCI for the effective portion of the change in fair value of the derivative designated as a cash flow hedge.

4)Record the acquisition of the furniture and its value at the spot rate.

5)Record the revaluation of the foreign currency receivable and record into OCI the effective portion of change in fair value of the derivative designated as a cash flow hedge

6)Record the revaluation of the foreign currency payable using the spot rate and recognizing the change into current earnings as specified by ASC 830.

7)Record the reclassification amount from OCI sufficient to completely offset the foreign currency transaction gain on the foreign currency payable (A$) that was hedged with a derivative designated as a cash flow hedge.

8)Record the delivery of U.S. dollars to an exchange broker.

9)Record the receipt of A$110,000 from the broker in accordance with the forward contract signed on December 1.

10)Record the delivery of A$110,000 to a foreign creditor.

d. The forward contract was for speculative purposes only. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1)Record a 120-day forward contract signed for speculation.

2)Record the revaluation of the foreign currency receivable.

3)Record the revaluation of the foreign currency payable to the equivalent U.S. dollar value.

4)Record the acquisition of the furniture and its value at the spot rate.

5)Record the revaluation of the foreign currency receivable to the current U.S. dollar equivalent.

6)Record the revaluation of the foreign currency receivable.

7)Record the delivery of U.S. dollars to an exchange broker as required by the forward contract.

8)Record the receipt of A$110,000 from the exchange broker in accordance with the forward contract.

9)Record the delivery of A$110,000 to a creditor.

e. Assume that interest is significant and the time value of money is considered in valuing the forward contract. Use a 12 percent annual interest rate. Prepare all journal entries required if, as in requirement (a), the forward contract was to manage the foreign currencydenominated payable from the purchase of furniture for 110,000 Australian dollars on December 1, 20X1, with payment due on March 31, 20X2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to nearest whole amount and use these values in subsequent computations.)

1)Record the foreign currency payable.

2)Record the forward exchange contract signed to hedge the exposed foreign currency payable.

3)Record the revaluation of the foreign currency payable.

4)Record the revaluation of the foreign currency receivable.

5)Record the revaluation of the foreign currency receivable to the current U.S. dollar equivalency.

6)Record the revaluation of the foreign currency receivable.

7)Record the revaluation of the foreign currency payable

8)Record the delivery of U.S. dollars to an exchange broker as required by the forward contract.

9)Record the receipt of A$110,000 from the exchange broker in accordance with the forward contract.

10)Record the delivery of A$110,000 to a creditor.