On October 1, FY6, 654321 Canada Inc. signed an inventory sales contract with a customer in Italy for a sale price of 400,000. Under the contract, inventory was to be delivered to the customer on January 31 of FY7 and to be paid upon delivery. 654321 Canada Inc. immediately entered into a forward foreign exchange contract to deliver $400,000 on January 31 of fiscal year 7 , at a price of 1 EURO =$1.20. 654321 Canada Inc.'s fiscal year ends on December 31. The inventory was delivered on January 31 of fiscal year 7, 654321 Canada Inc. received the 400,000 Euros in payment and delivered them to the bank. The exchange rates were as follows: Work to be done 1. Prepare the journal entries that 654321 Canada Inc. must make to record the events described above assuming that the futures contract is designated as a cash flow hedge. 2. Prepare a partial trial balance of the accounts used as at 31 December of FY6 and indicate how each would appear in the company's financial statements. 3. Prepare the entries that the company would have to make to record the events described above assuming that the futures contract is a fair value hedge. 4. Prepare a partial trial balance of the accounts used as at 31 December of year 6 and indicate how each would appear in the company's financial statements. 5. Describe the effect of hedge accounting on the working capital ratio and determine the accounting treatment of the hedge that would have the best liquidity. On October 1, FY6, 654321 Canada Inc. signed an inventory sales contract with a customer in Italy for a sale price of 400,000. Under the contract, inventory was to be delivered to the customer on January 31 of FY7 and to be paid upon delivery. 654321 Canada Inc. immediately entered into a forward foreign exchange contract to deliver $400,000 on January 31 of fiscal year 7 , at a price of 1 EURO =$1.20. 654321 Canada Inc.'s fiscal year ends on December 31. The inventory was delivered on January 31 of fiscal year 7, 654321 Canada Inc. received the 400,000 Euros in payment and delivered them to the bank. The exchange rates were as follows: Work to be done 1. Prepare the journal entries that 654321 Canada Inc. must make to record the events described above assuming that the futures contract is designated as a cash flow hedge. 2. Prepare a partial trial balance of the accounts used as at 31 December of FY6 and indicate how each would appear in the company's financial statements. 3. Prepare the entries that the company would have to make to record the events described above assuming that the futures contract is a fair value hedge. 4. Prepare a partial trial balance of the accounts used as at 31 December of year 6 and indicate how each would appear in the company's financial statements. 5. Describe the effect of hedge accounting on the working capital ratio and determine the accounting treatment of the hedge that would have the best liquidity