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.

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.)

Date	General Journal	Debit	Credit
09/15	Inventory
	Accounts payable (euro)
09/15	No journal entry required
09/30	Foreign exchange loss
	Accounts payable (euro)
09/30	Forward contract
	Gain on forward contract
10/31	Foreign exchange loss
	Accounts payable (euro)
10/31	Forward contract
	Gain on forward contract
10/31	Foreign currency (euro)
	Cash
	Forward contract
10/31	Accounts payable (euro)
	Foreign currency (euro)

c.

Vino Veritas ordered the wine on September 15, 2015. The wine arrived and the company paid for it on October 31, 2015. On September 15, Vino Veritas entered into a 45-day forward contract to purchase 350,000 euros. The company properly designated the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate. Prepare journal entries to account for the foreign currency forward contract, firm commitment, and import purchase. (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.)

Date	General Journal	Debit	Credit
09/15	No journal entry required
09/15	No journal entry required
09/30	Forward contract
	Gain on forward contract
09/30	Loss on firm comittment
	Firm commitment
10/31	Forward contract
	Gain on forward contract
10/31	Loss on firm comittment
	Firm commitment
10/31	Foreign currency (euro)
	Cash
	Forward contract
10/31	Firm commitment
	Adjustment to net income

d.

The wine arrived on September 15, 2015, and the company made payment on October 31, 2015. On September 15, Vino Veritas purchased a 45-day call option for 350,000 euros. It properly designated the option as a cash flow hedge of a foreign currency payable. Prepare journal entries to account for the import purchase and foreign currency option. (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.)

Date

General Journal

Debit

Credit

09/15

Inventory

Accounts payable (euro)

09/15

Foreign currency option

Cash

09/30

Foreign exchange loss

Accounts payable (euro)

09/30

Foreign currency option

Accum. other comprehensive income

09/30

Accum. other comprehensive income

Gain on foreign currency option

09/30

Option expense

Accum. other comprehensive income

10/31

Foreign exchange loss

Accounts payable (euro)

10/31

Foreign currency option

Accum. other comprehensive income

10/31

Accum. other comprehensive income

Gain on foreign currency option

10/31

Option expense

Accum. other comprehensive income

10/31

Foreign currency (euro)

Cash

Foreign currency option

10/31

Accounts payable (euro)

Foreign currency (euro)

e.

The company ordered the wine on September 15, 2015. It arrived on October 31, 2015, and the company made payment on that date. On September 15, Vino Veritas purchased a 45-day call option for 350,000 euros. It properly designated the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. Prepare journal entries to account for the foreign currency option, firm commitment, and import purchase. (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 the nearest dollar amount.)