Question 3 incomplete answer Marked out of 7.00 Pagestion Forward exchange contract designated as a fair value hedge of a foreign currency.denominated firm commitment to sell inventory, weakening SUS Our U.S.-based company enters into a firm commitment with Malta-based retailer on November 10, 2018. The firm commitment requires our company to sell 70,000 units of an inventory item costing 11.00 each to the Maltese company. Our company is contractually committed to ship the inventory (ie, title transfers) on February 10, 2019, with payment in Euros on the same date. Our company does recurring business with the Maltese company, and the firm commitment includes significant monetary penalties for nonperformance. Also assume, on November 10, 2018, our company enters into a contract with a foreign currency exchange broker to sell Euros (for settlement on February 10, 2019) to mitigate the risk of exchange rate fluctuation. Our company's functional currency is the U.S. dollar and our forward exchange contract qualifies as a fair value hedge. The relevant exchange rates and related balances for the period from November 10, 2018, to February 10, 2019, are as follows: Derivative-Forward Forward Spot Rate Sale Rate FV Asset Change (SUS - (1) Transaction (SUS=C1) (Llability in FV November 10, 2018 1.20 1.22 December 31, 2018 1.27 5038,500) 5(38,500 February 10, 2019 1.29 153.9000 (15,4001 Date For settlement on February 10, 2019 ignore discounting in the computation of fair values. Date Debit Credit a. Prepare the journal entries to record the sale and all adjustments required for the firm commitment and forward contract at November 10, 2018, December 31, 2018, and February 10, 2019 Note: If no entry is required, select "No entry" as your answers under Description and leave the debit and credit answers blank (zero). Hedged Transaction Description 11/10/18 Accounts payable . Accounts receivable 12/31/18 Accounts receivable Gain doss) on AS security 2/10/19 Gain Gloss) on AS security Hedged firm commitment asset To record sale of inventory D g . 0 0 0 0 0 0 0 0 0 0 0 To record change in value 0 0 0 To reclassily firm commitment FV Hedge Date 11/10/18 Description Debit Credit 0 0 0 0 12/31/18 0 o 0 0 2/10/19 O 0 . 0 0 To record change in value 0 O + 0 10:45 PL FV Hedge Date 11/10/18 Description Debit Credit . o 0 0 12/31/18 0 0 . 2/10/19 O 0 0 To record change in value 0 0 0 0 To record the net settlement. b. Reconcile to the forward rate at the forward contract's inception the net cash received for both the sale of goods and the settlement of the forward-contract derivative. Net cash received for sale of goods and settlement of the forward contract derivative is: $0 c. What amount of sales was recognized in the quarter ending December 31, 2018? Note: Do not use a negative sign with any of your answers below. $ 0 What amount of sales was recognized in the quarter ending March 31, 2019? $ 0 What is the total amount of sales recognized across the quarters ending December 31, 2018, and March 31, 20197 $ Question 3 incomplete answer Marked out of 7.00 Pagestion Forward exchange contract designated as a fair value hedge of a foreign currency.denominated firm commitment to sell inventory, weakening SUS Our U.S.-based company enters into a firm commitment with Malta-based retailer on November 10, 2018. The firm commitment requires our company to sell 70,000 units of an inventory item costing 11.00 each to the Maltese company. Our company is contractually committed to ship the inventory (ie, title transfers) on February 10, 2019, with payment in Euros on the same date. Our company does recurring business with the Maltese company, and the firm commitment includes significant monetary penalties for nonperformance. Also assume, on November 10, 2018, our company enters into a contract with a foreign currency exchange broker to sell Euros (for settlement on February 10, 2019) to mitigate the risk of exchange rate fluctuation. Our company's functional currency is the U.S. dollar and our forward exchange contract qualifies as a fair value hedge. The relevant exchange rates and related balances for the period from November 10, 2018, to February 10, 2019, are as follows: Derivative-Forward Forward Spot Rate Sale Rate FV Asset Change (SUS - (1) Transaction (SUS=C1) (Llability in FV November 10, 2018 1.20 1.22 December 31, 2018 1.27 5038,500) 5(38,500 February 10, 2019 1.29 153.9000 (15,4001 Date For settlement on February 10, 2019 ignore discounting in the computation of fair values. Date Debit Credit a. Prepare the journal entries to record the sale and all adjustments required for the firm commitment and forward contract at November 10, 2018, December 31, 2018, and February 10, 2019 Note: If no entry is required, select "No entry" as your answers under Description and leave the debit and credit answers blank (zero). Hedged Transaction Description 11/10/18 Accounts payable . Accounts receivable 12/31/18 Accounts receivable Gain doss) on AS security 2/10/19 Gain Gloss) on AS security Hedged firm commitment asset To record sale of inventory D g . 0 0 0 0 0 0 0 0 0 0 0 To record change in value 0 0 0 To reclassily firm commitment FV Hedge Date 11/10/18 Description Debit Credit 0 0 0 0 12/31/18 0 o 0 0 2/10/19 O 0 . 0 0 To record change in value 0 O + 0 10:45 PL FV Hedge Date 11/10/18 Description Debit Credit . o 0 0 12/31/18 0 0 . 2/10/19 O 0 0 To record change in value 0 0 0 0 To record the net settlement. b. Reconcile to the forward rate at the forward contract's inception the net cash received for both the sale of goods and the settlement of the forward-contract derivative. Net cash received for sale of goods and settlement of the forward contract derivative is: $0 c. What amount of sales was recognized in the quarter ending December 31, 2018? Note: Do not use a negative sign with any of your answers below. $ 0 What amount of sales was recognized in the quarter ending March 31, 2019? $ 0 What is the total amount of sales recognized across the quarters ending December 31, 2018, and March 31, 20197 $
