On Nov 15, 2018 ABC a calendar year company purchases 10,000 units of a product from a manufacturer in Italy at a sales price of 15 euro per unit to be paid in euro on Feb 15, 2019. To hedge against possible translation losses, ABC contracted a 150,000 Euro fair value derivative hedge when the forward rate is $1.35 per Euro.

Rate changes are listed below.

Spot rate Acct Pay Forward rate

Carrying value FV derivative

Nov 15, 2018 1.30 ($195,000) 1.35

Dec 31, 2018 1.40 $________ 1.42 $________

Feb 15, 2019 1.45 $________ 1.45 $________

Prepare the journal entries related to the A/P and the derivative as of 11/15, 12/31 & 2/15.

Foreign-currency-denominated account payable Forward contract derivative fair value hedge

11/15

Inventory 195,000

Account payable 195,000

12/31

2/15