On December 1, 20X1, Micro World Inc. entered into a 120-day forward contract to purchase 120,000 Australian dollars (A$). Micro World's fiscal year ends on December 31. The direct exchange rates follow Forward Rate for March 31, 20x2 Spot Rate Date $0.600 $0.609 December 1, 20x1 December 31, 20X1 0.610 0.612 January 30, 20x2 March 31, 20x2 0.608 0.605 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$120,000 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.) 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.) Journal entry worksheet 1 6 7 8 10 2 3 4 5 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$120,000 Note: Enter debits before credits. Date General Journal Debit Credit Dec. 1, 20X1 Record entry Clear entry View general journal Journal entry worksheet 1 2 3 4 5 6 7 8 10 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 Note: Enter debits before credits. Date General Journal Debit Credit Dec. 31, 20X1 Record entry Clear entry View general journal CO LO Journal entry worksheet wwwwL 10 1 2 3 4 6 7 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. Note: Enter debits before credits Date General Journal Debit Credit Jan. 30, 20X2 Record entry Clear entry View general journal CC LO Journal entry worksheet 1 2 3 4 6 7 8 10 Record the acquisition of the furniture and its value at the spot rate. Note: Enter debits before credits. General Journal Date Debit Credit Jan. 30, 20X2 Record entry Clear entry View general journal Journal entry worksheet 1 2 4 5 6 7 10 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 Note: Enter debits before credits. Date General Journal Debit Credit Mar. 31, 20X2 Record entry Clear entry View general journal CO Journal entry worksheet 10 1 2 3 4 5 6 7 8 9 Record the revaluation of the foreign currency payable using the spot rate and recognizing the change into current earnings as specified by ASC 830 Note: Enter debits before credits. Date General Journal Debit Credit Mar. 31, 20X2 Record entry Clear entry View general journal LC Journal entry worksheet 10 1 2 3 4 5 6 7 9 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 Note: Enter debits before credits. Date General Journal Debit Credit Mar. 31, 20X2 View general journal Record entry Clear entry CO CC IC Journal entry worksheet 2 3 4 5 7 9 10 1 6 Record the receipt of A$120,000 from the broker in accordance with the forward contract signed on December 1 Note: Enter debits before credits. Debit Date General Journal Credit Mar. 31, 20X2 Clear entry Record entry View general journal Journal entry worksheet 10 1 2 3 4 5 6 7 Record the delivery of A$120,000 to a foreign creditor Note: Enter debits before credits. Date General Journal Debit Credit Mar. 31, 20X2 Record entry View general journal Clear entry