On January 15, 20X2, XYZ Ltd., a Canadian company, entered into an agreement with Bee Bee Ltd., a foreign company, to purchase inventory for 300,000FC. The inventory is to be delivered on May 5, 20X2. In accordance with the agreement, XYZ will make payment on May 31, 20X2. On January 15, 20X2, XYZs bank arranged for a 300,000FC hedge against XYZs commitment to Bee Bee. The spot rate on January 15 was 1FC = $1.40 CDN and the May 31, 20X2 forward rate was 1FC = $1.442 CDN.

At XYZs March 31, 20X2 year-end, the spot rate was 1FC = $1.42 CDN and the forward rate to May 31, 20X2 was 1FC = $1.45 CDN. When Bee Bee delivered the merchandise to XYZ on May 5, 20X2, the spot rate was 1FC = $1.44 CDN and the forward rate was 1FC = $1.46 CDN. XYZ paid Langdon on May 31, as required. On that date, the spot rate was 1FC = $1.47 CDN.

Required:

The hedge arranged by XYZ is a cash hedge. Prepare the journal entries to record the acquisition of the inventory and the related hedge through to May 31, 20X2 using the net method.