On November 15, 2013, Oil&Gas Inc. imported 500,000 barrels of oil from an oil company in Venezuela. Oil&Gas agreed to pay 50,000,000 bolivars on January 15, 2014. To ensure that the dollar outlay for the purchase will not fluctuate, the company entered into a forward contract to buy 50,000,000 bolivars on January 15 at the forward rate of $0.0269. Exchanges rates on various dates were:

November 15, 2013: Spot Rate = $0.0239 ; Forward Rate 1/15 Delivery = $0.0269

December 31, 2013: Spot Rate = $0.0224 ; Forward Rate 1/15 Delivery = $0.0254

January 15, 2014: Spot Rate = $0.0291

Oil&Gas properly account for the transaction as Fair Value Hedge. The 15-day present value factor is 0.9934.

Required:

1) Record the journal entries needed by Oil&Gas on November 15, December 31 and January 15. Round all entries to the nearest whole dollar. (10 points)

2)Answer the following questions: a. Indicate the amount of the discount or premium at which the foreign currency was original sold in the foreign currency market. (1 point)

b. What is the dollar amount paid by Oil&Gas on January 15, 2014? (1 point)

c. What is the accumulated net impact on Oil&Gass Stockholder equity related to this transaction at January 15, 2014? (1 point)

d. What would have been the dollar amount paid by Oil&Gas to settle the account payable had Oil&Gas not hedged the purchase contract with the forward contract? (1 point)

e. What would have been the accumulated net impact on Oil&Gass Stockholder equity related to this transaction on January 15, 2014 if Oil&Gas had not entered in the Forward Contract? Was Oil&Gas better off or worse off with the derivative contract? (1 point)