Problem 2. A U.S. company purchases merchandise from a Hong Kong supplier on a regular basis. The following events occur: - October 1, 2017: The company signed a forward contract to purchase HK$1,000,000 for delivery on May 1, 2018, in anticipation of an expected payment of HK$ for a forecasted merchandise purchase. - December 1, 2017: The company issued a purchase order for HK$1,000,000 in merchandise from the supplier. - March 1, 2018: The company took delivery of the merchandise. - May 1, 2018: The company closed the forward contract and paid the supplier. - May 31, 2018: The company sold the merchandise to a US. customer for $200,000. The company's accounting year ends December 31. Exchange rates ($/HK$) are as follows: 0 Spot rate Forward rate for delivery 5/1/2018 October 1, 2017 $0.127 December 1, 2017 0.1285 December31, 2017 0.131 March 1,2018 0.1317 May 1,2018 0.132 0.132 Instructions Prepare the journal entries to record the above transactions, including necessary adjusting entries. Assume the hedge qualifies for hedge accounting