Vino Veritas Company, a U.S.based importer of wines and spirits, placed an order with a French supplier for 1,400 cases of wine at a price of 250 euros per case. The total purchase price is 350,000 euros. Relevant exchange rates for the euro are as follows:

Date	Spot Rate			Forward Rate to October 31, 2015			Call Option Premium for October 31, 2015 (strike price $1.25)
September 15, 2015	$	1.25		$	1.31		$	0.060
September 30, 2013		1.30			1.34			0.095
October 31, 2015		1.35			1.35			0.100

Vino Veritas Company has an incremental borrowing rate of 12 percent (1 percent per month) and closes the books and prepares financial statements at September 30.

a.

Assume that the wine arrived on September 15, 2015, and the company made payment on October 31, 2015. There was no attempt to hedge the exposure to foreign exchange risk. Prepare journal entries to account for this import purchase. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Date	General Journal	Debit	Credit
09/15	Inventory	?
	Accounts payable (euro)		?
09/30	Foreign currency (euro)	?
	Accounts payable (euro)		?
10/31	Foreign exchange loss	?
	Accounts payable (euro)		?
10/31	Foreign currency (euro)	?
	Cash		?
10/31	Accounts payable (euro)	?
	Foreign currency (euro)		?

b.

Assume that the wine arrived on September 15, 2015, and the company made payment on October 31, 2015. On September 15, Vino Veritas entered into a 45-day forward contract to purchase 350,000 euros. It properly designated the forward contract as a fair value hedge of a foreign currency payable. Prepare journal entries to account for the import purchase and foreign currency forward contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your present value interest factor to four decimal places. Round your answers to 2 decimal places.)