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Pacifico Company, a U . S . - based importer of beer and wine, purchased 1 , 0 0 0 cases of Oktoberfest - style

Pacifico Company, a U.S.-based importer of beer and wine, purchased 1,000 cases of Oktoberfest-style beer from a German supplier for 50,000 euros. Relevant U.S. dollar exchange rates for the euro are as follows:
Date Spot Rate Forward Rate to October 15 Call Option Premium for October 15(strike price $1.10)
August 15 $ 1.10 $ 1.16 $ 0.05
September 301.151.190.06
October 151.181.18(spot) N/A
The company closes its books and prepares third-quarter financial statements on September 30.
Assume that the company ordered the beer on August 15. The beer arrived and the company paid for it on October 15. On August 15, the company entered into a two-month forward contract to purchase 50,000 euros. The company designated the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate. Forward points are not excluded in assessing hedge effectiveness. Prepare journal entries to account for the foreign currency forward contract, foreign currency firm commitment, and import purchase.\table[[No,Date,General Journal,Debit,Credit],[1,0815,No Journal Entry Required,,,],[2,0930,Forward Contract,,,],[,,Foreign Exchange Gain or Loss,,,],[3,0930,Foreign Exchange Gain or Loss,,,],[,,Firm Commitment,,,],[4,1015,Foreign Exchange Gain or Loss,,,],[,,Forward Contract,,,],[5,1015,Firm Commitment,,,],[,,Foreign Exchange Gain or Loss,,,],[6,1015,Foreign Currency (euro),,,],[,,Cash,,,],[,,Forward Contract,,,],[7,1015,Inventory,,,],[,,Foreign Currency (euro),,,],[8,1015,Cost of Goods Sold,,,],[,,Inventory,,,],[9,1015,Firm Commitment,,,],[,,Cost of Goods Sold,,,]]
1Record entry placed for purchase of Beer.
2Record gain or loss on forward contract.
3Record gain or loss on firm commitment.
4Record the gain or loss on the forward contract.
5Record the forward contract fair value hedge of a firm commitment.
6Record purchase of foreign currency for settling the accounts payable.
7Record the purchase of inventory.
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