On June 1, Year 3, STL Corp. (STLC) ordered merchandise from a supplier in Turkey for Turkish lira (TL) 209,000. The goods were delivered on September 30, with terms requiring cash on delivery. On June 2, Year 3, STLC entered a forward contract as a cash flow hedge to purchase TL 209,000 on September 30, Year 3, at a rate of $0.82. STLC's year-end is June 30.

On September 30, Year 3, STLC paid the foreign supplier in full and settled the forward contract.

Exchange rates were as follows:

Spot Rates

Forward Rates*

June 1 and 2, Year 3

TL1 = $0.790

TL1 = $0.820

June 30, Year 3

TL1 = $0.780

TL1 = $0.815

September 30, Year 3

TL1 = $0.830

TL1 = $0.830

*For contracts expiring on September 30, Year 3.

3a) Which journal entry under the assumption that no forward contract was entered would be correct?

1.June 30, Year 3 DR Inventory 173,470

CR Commitment liability 173,470

2.Sep 30, Year 3 DR Inventory 173,470

CR Cash 173,470

3.June 1, Year 3 DR Inventory 165,110

CR Cash 165,110

4.Sep 30, Year 3 DR Inventory 171,380

CR Cash 171,380

3b) Assume that STLC is a private company, uses a forward contract, and uses ASPE for reporting purposes. Which journal entries would be correct under this reporting standard according to the situation given in case 3a? Please select the best answer.

1.

June 30, Year 3

Cash 170,335

Forward contract 1,045

Cash 171,380

Sep 30, Year 3

Inventory 171,380

Cash 171,380

Sep 30, Year 3

Forward contract 1,045

Inventor 1,045

2.

June 2, Year 3

Cash 173,470

Exchange gain/loss 2,090

Cash 171,380

June 30, Year 3

Inventory 171,380

Cash 171,3800

Sep 30, Year 3

Exchange gain/loss 2,090

Inventory 2,090

3.

Sep 30, Year 3

Cash 173,470

Forward contract 2,090

Cash 171,380

Sep 30, Year 3

Inventory 173,470

Cash 173,470

Sep 30, Year 3

Forward contract 2,090

Inventory 2,090

4.

June 2, Year 3

Cash 173,470

Forward contract 2,090

Cash 171,380

Sep 30, Year 3

Inventory 173,470

Cash 173,470

Sep 30, Year 3

Forward contract 2,090

Inventory 2,090

3c) Prepare all journal entries necessary for STLC assuming in case 3a, it entered into a forward contract using casflow hedge.

Please upload a file document showing all journal enries with date, name of journal and amounts. Show all computations for part marks. If no journals are needed, please specify so.

3d) Prepare all necessary journal entries to record the transactions described in case 3a, assuming that the forward contract was designated as a fair value hedge.

Provide all details to journals with date, name of journal and amount. Show all your work such as computations as well