On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to sell 140,000 rubles in four months (on January 31, 2018) and receive $60,200 in U.S. dollars. Exchange rates for the ruble follow:

Date	Spot Rate			Forward Rate (to January 31, 2018)
October 1, 2017	$	0.39		$	0.43
December 31, 2017		0.42			0.45
January 31, 2018		0.44			N/A

Sharp's incremental borrowing rate is 12 percent. The present value factor for one month at an annual interest rate of 12 percent (1 percent per month) is 0.9901. Sharp must close its books and prepare financial statements on December 31.

Prepare journal entries, assuming that Sharp entered into the forward contract as a fair value hedge of a 140,000 ruble receivable arising from a sale made on October 1, 2017. Include entries for both the sale and the forward contract.

Prepare journal entries, assuming that Sharp entered into the forward contract as a fair value hedge of a firm commitment related to a 140,000 ruble sale that will be made on January 31, 2018. Include entries for both the firm commitment and the forward contract. The fair value of the firm commitment is measured by referring to changes in the forward rate.

1

Record the sale.

2

Record entry for forward contract entered into by Hanks Company.

3

Record the entry for changes in the exchange rate.

4

Record gain or loss on forward contract.

5

Record the entry for changes in the exchange rate.

6

Record gain or loss on forward contract.

7

Record the receipt of LCUs.

8

Record settlement of forward contract.

B

1

Record entry for foreign currency firm commitment entered into by Hanks Company.

2

Record entry for forward contract entered into by Hanks Company.

3

Record gain or loss on forward contract.

4

Record gain or loss on firm commitment.

5

Record gain or loss on forward contract.

6

Record gain or loss on firm commitment.

7

Record sale of LCU by Hanks Company.

8

Record settlement of forward contract.

9

Record entry to close the firm commitment.