On October $1,$ Year $6,$ Versatile Company contracted to sell merchandise to a customer in Switzerland at a selling price of CHF$430,000.$ The contract called for the merchandise to be delivered to the customer on January $31,$ Year $7,$ with payment due on delivery. On October $1,$ Year $6,$ Versatile arranged a forward contract to deliver CHF$430,000$ on January $31,$ Year $7,$ at a rate of CHF$1=$ $$2\mathrm{.}29.$ Versatile$$s year$-$end is December $31.$

The merchandise was delivered on January $31,$ Year $7,$ and CHF$430,000$ was received and delivered to the bank.

Exchange rates were as follows:

Spot Rates Forward Rates$**$

October $1,$ Year $6$ CHF$1=$ $$2\mathrm{.}27$ CHF$1=$ $$2\mathrm{.}29$

December $31,$ Year $6$ CHF$1=$ $$2\mathrm{.}30$ CHF$1=$ $$2\mathrm{.}31$

January $31,$ Year $7$ CHF$1=$ $$2\mathrm{.}28$ CHF$1=$ $$2\mathrm{.}28$

$**$For contracts expiring on January $31,$ Year $7.$

Required:

$($a$)$ Prepare the journal entries $($using net method$)$ that Versatile should make to record the events described assuming that the forward contract is designated as a cash flow hedge. $($In cases where no entry is required, please select the option $"$No journal entry required" for your answer to grade correctly. Leave no cells blank $-$ be certain to enter $"0"$ wherever required.$)$

Date General Journal Debit Credit

October $1,$ Year $6$

Receivable from bank

$430000$

Forward contract

$430000$

Record the forward contract.

December $31,$ Year $6$

Other comprehensive income

$3000$

Forward contract

$3000$

Record the adjustment of forward contract to forward rate.

January $31,$ Year $7$

Receivable from bank

$430000$

Sales

$430000$

Record the sales.

Commitment receivable

$2000$

Other comprehensive income

$2000$

Record the adjustment of forward contract to forward rate.

Other comprehensive income

$1000$

Exchange gain

$1000$

Record the adjustment of other comprehensive income.

$($Click to select$)$

$($Click to select$)$

$($Click to select$)$

Record the forward contract with bank.

$($b$)$ Prepare a partial trial balance of the accounts used as at December $31,$ Year $6.($Leave no cells blank $-$ be certain to enter $"0"$ wherever required. Omit $ sign in your response.$)$

Partial trial balance

December $31,$ Year $6$

Account Debit Credit

$($Click to select$)$

$

$

$($Click to select$)$

$

$

$($c$)$ Prepare the journal entries $($using net method$)$ that Versatile should make to record the events described, assuming that the forward contract is designated as a fair value hedge. $($In cases where no entry is required, please select the option $"$No journal entry required" for your answer to grade correctly. Leave no cells blank $-$ be certain to enter $"0"$ wherever required.$)$

Date General Journal Debit Credit

October $1,$ Year $6$

$($Click to select$)$

$($Click to select$)$

Record the forward contract.

December $31,$ Year $6$

$($Click to select$)$

$($Click to select$)$

Record the adjustment of forward contract to forward rate.

$($Click to select$)$

$($Click to select$)$

Record the adjustment of upcoming accounts receivable value to the forward rate.

January $31,$ Year $7$

$($Click to select$)$

$($Click to select$)$

Record the sales.

$($Click to select$)$

$($Click to select$)$

Record the adjustment of forward contract to forward rate.

$($Click to select$)$

$($Click to select$)$

Record the adjustment of upcoming accounts receivable value to the forward rate.

$($Click to select$)$

$($Click to select$)$

Record to clear other commitment receivable to sales account.

$($Click to select$)$

$($Click to select$)$

$($Click to select$)$

Record the forward contract with bank.

$($d$)$ Prepare a partial trial balance of the accounts used as at December $31,$ Year $6.($Leave no cells blank $-$ be certain to enter $"0"$ wherever required. Omit $ sign in your response.$)$

Partial trial balance

December $31,$ Year $6$

Account Debit Credit

$($Click to select$)$

$

$

$($Click to select$)$

$

$

$($Click to select$)$

$

$