Pacifico Company, a U.S.-based importer of beer and wine, purchased 1,900 cases of Oktoberfest-style beer from a German supplier for 570,000 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 $1.50) August 15 $ 1.50 $ 1.56 $ 0.05 September 30 1.55 1.59 0.06 October 15 1.58 1.58 (spot) N/A The company closes its books and prepares third-quarter financial statements on September 30.

1. Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 570,000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare journal entries to account for the import purchase and foreign currency forward contract.