On October 1, Year 6, Versatile Company contracted to sell merchandise to a customer in Switzerland at a selling price of CHF430,000. 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 CHF430,000 on January 31, Year 7, at a rate of CHF1 = $2.29. Versatiles year-end is December 31.

The merchandise was delivered on January 31, Year 7, and CHF430,000 was received and delivered to the bank.

Exchange rates were as follows:

	Spot Rates	Forward Rates**
October 1, Year 6	CHF1 = $2.27	CHF1 = $2.29
December 31, Year 6	CHF1 = $2.30	CHF1 = $2.31
January 31, Year 7	CHF1 = $2.28	CHF1 = $2.28

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	(Click to select) Other comprehensive income No journal entry required Cash Receivable from bank Payable to bank Exchange loss Equipment Land Commitment receivable
	(Click to select) No journal entry required Cash Exchange loss Forward contract Land Other comprehensive income Equipment Commitment receivable Receivable from bank
	Record the forward contract.
December 31, Year 6	(Click to select) Other comprehensive income Forward contract Commitment receivable No journal entry required Equipment Cash Exchange loss Receivable from bank Land
	(Click to select) Interest receivable Exchange gain Notes payable Accounts payable Sales Bills payable Forward contract No journal entry required Loan payable
	Record the adjustment of forward contract to forward rate.
January 31, Year 7	(Click to select) Exchange loss Equipment No journal entry required Land Cash (CHF) Commitment receivable Payable to bank Other comprehensive income Receivable from bank
	(Click to select) Notes payable Loan payable Accounts payable Bills payable Exchange gain Interest receivable Sales No journal entry required Payable to bank
	Record the sales.
	(Click to select) Exchange loss No journal entry required Other comprehensive income Forward contract Commitment receivable Equipment Cash Receivable from bank Land
	(Click to select) No journal entry required Other comprehensive income Loan payable Sales Accounts payable Interest receivable Exchange gain Bills payable Notes payable
	Record the adjustment of forward contract to forward rate.
	(Click to select) Cash Other comprehensive income Land No journal entry required Equipment Exchange loss Commitment receivable Payable to bank Receivable from bank
	(Click to select) Sales Payable to bank Bills payable Notes payable Interest receivable Exchange gain Loan payable No journal entry required Accounts payable
	Record the adjustment of other comprehensive income.
	(Click to select) Equipment Cash No journal entry required Exchange loss Payable to bank Other comprehensive income Receivable from bank Land Commitment receivable
	(Click to select) Loan payable No journal entry required Exchange gain Interest receivable Bills payable Notes payable Forward contract Sales Accounts payable
	(Click to select) No journal entry required Interest receivable Cash (CHF) Loan payable Payable to bank Sales Notes payable Accounts payable Bills payable
	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) Notes payable Exchange gain Accounts payable Interest receivable Forward contract Sales Loan payable Bills payable	$	$
(Click to select) Accounts receivable Purchase Exchange loss Land Other comprehensive income Receivable from bank Equipment Inventory	$	$

(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) Payable to bank Commitment receivable Equipment Land Receivable from bank No journal entry required Other comprehensive income Exchange loss Cash
	(Click to select) Exchange loss Payable to bank Cash Land Other comprehensive income Commitment receivable Receivable from bank No journal entry required Equipment
	Record the forward contract.
December 31, Year 6	(Click to select) Other comprehensive income Cash No journal entry required Land Commitment receivable Payable to bank Exchange gains and losses Equipment Patents
	(Click to select) Loan payable Exchange gain Interest receivable Sales Bills payable Notes payable Accounts payable Forward contract No journal entry required
	Record the adjustment of forward contract to forward rate.
	(Click to select) Receivable from bank Inventory No journal entry required Cash Exchange loss Commitment receivable Land Accounts receivable Purchase
	(Click to select) Exchange gains and losses Bills payable Sales Accounts payable Payable to bank Interest receivable Notes payable No journal entry required Loan payable
	Record the adjustment of upcoming accounts receivable value to the forward rate.
January 31, Year 7	(Click to select) Equipment No journal entry required Purchase Accounts receivable Land Receivable from bank Cash (CHF) Exchange loss Inventory
	(Click to select) Loan payable Accounts payable Sales Bills payable Payable to bank No journal entry required Interest receivable Exchange gain Notes payable
	Record the sales.
	(Click to select) Accounts receivable Equipment Land Receivable from bank Inventory Exchange loss No journal entry required Forward contract Purchase
	(Click to select) Interest receivable Bills payable Exchange gains and losses No journal entry required Payable to bank Notes payable Accounts payable Sales Loan payable
	Record the adjustment of forward contract to forward rate.
	(Click to select) Purchase Land No journal entry required Cash Equipment Receivable from bank Accounts receivable Exchange gains and losses Inventory
	(Click to select) Exchange gain Payable to bank Commitment receivable No journal entry required Sales Bills payable Accounts payable Loan payable Notes payable
	Record the adjustment of upcoming accounts receivable value to the forward rate.
	(Click to select) Purchase No journal entry required Equipment Commitment receivable Inventory Accounts receivable Receivable from bank Cash Exchange loss
	(Click to select) Loan payable No journal entry required Notes payable Sales Payable to bank Accounts payable Bills payable Interest receivable Exchange gain
	Record to clear other commitment receivable to sales account.
	(Click to select) Exchange loss Land Purchase Equipment Accounts receivable Payable to bank No journal entry required Inventory Cash
	(Click to select) Interest receivable Accounts payable Notes payable Loan payable Forward contract Exchange gain Bills payable No journal entry required Sales
	(Click to select) Payable to bank Notes payable Accounts payable Sales No journal entry required Loan payable Cash (CHF) Bills payable Interest receivable
	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) Receivable from bank Commitment receivable Inventory Accounts receivable Purchase Land Equipment	$	$
(Click to select) Cash Purchase Inventory Equipment Land Forward contract Accounts receivable	$	$
(Click to select) Equipment Receivable from bank Exchange gains and losses Equipment Inventory Purchase Land Accounts receivable	$	$