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

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

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

(e) This part of the question is not part of your Connect assignment.