On October 1, 2018, Crusie Co. sold inventory to a customer in a foreign country, denominated in 100,000 local currency units (LCU). Collection is expected in four months. On October 1, 2018, a forward exchange contract was acquired whereby Crusie Co. was to pay 100,000 LCU in four months (on February 1, 2019) and receive $78,000 in U.S. dollars. The spot and forward rates for the LCU were as follows:

Date	Rate Description	Exchange Rate
October 1, 2018	Spot Rate	$0.83
December 31, 2018	Spot Rate	$0.85
	1-month Forward Rate	$0.80
February 1, 2019	Spot Rate	$0.86

The company's borrowing rate is 12%. The present value factor for one month is .9901. Any discount or premium on the contract is amortized using the straight-line method. Assuming this is a cash flow hedge;

Calculate the forward rate at October 1, 2018

Prepare journal entries for this sales transaction and forward contract.

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