Packaging Specialists Inc. (PSI), a calendar-year corporation headquartered in the U.S., engaged in transactions at the end of the fourth quarter of 2020 and the beginning of 2021 with Maple Products Mfg., a Canadian company. PSI agreed to conduct all transactions with Maple Products Mfg. using Canadian dollars. The Company never completed a transaction in a foreign currency prior to its dealings with Maple Products Mfg.

The spot rates for converting U. S. dollars to and from Canadian dollars and vice versa on various dates in 2020 and 2021 were:

	Date	Spot Rate CAD per USD	Spot Rate USD per CAD
	December 10, 2020	C $1.315	$0.7605
	December 12, 2020	C $1.338	$0.7474
	December 22, 2020	C $1.342	$0.7452
	December 31, 2020	C $1.337	$0.7479
	January 10, 2021	C $1.295	$0.7722

PSI was concerned about its exposure to exchange rate risk. The Company decided to try to mitigate its risk by acquiring derivative instruments that were designated as cash flow hedges.

a) Prepare the journal entries required for Packaging Specialists Inc. to properly record the transactions with Maple Products Mfg. during 2020 and the related investments in cash flow hedges including any necessary adjusting entries. PSI records adjusting entries annually at its fiscal year-end.

1) On December 10, 2020, PSI sold and delivered goods to Maple Products Mfg. at a price of C$225,000 (CAD dollars) due in 30 days.

2) On December 10, 2020, Packaging Specialists Inc. entered into the forward contract to sell C$225,000 (CAD dollars) at a rate of $0.7605 USD per CAD.

3) On December 12, 2020, PSI received a shipment of gift packs (marketing expense) from Maple Products Mfg. with an invoice for C$15,000 (CAD dollars) due in 10 days.

4) On December 22, 2020, Packaging Specialists Inc. paid C$15,000 (CAD dollars) to Maple Products Mfg. in settlement of the amount due from the purchase of gift packs on December 12.

5) On December 31, 2020, Packaging Specialists Inc. prepared its adjusting entries to properly reflect its outstanding receivable from Maple Products Mfg. and the related cash flow hedge in its 2020 GAAP financial statements. Assume the forward rate was $0.7479 at December 31, 2020.

b) Prepare the journal entries required for Packaging Specialists Inc. to properly record the transactions related to Maple Products Mfg. during early January 2021.

6) On January 10, 2021, Packaging Specialists Inc. received C$225,000 (CAD dollars) from Maple Products Mfg. in settlement of the amount due from the sale of merchandise on December 10, 2020.

7) On January 10, 2021, Packaging Specialists Inc. completed the net settlement of the forward contract.