Vino Veritas Company, a U.S.-based importer of wines and spirits, placed an order with a French supplier for 2,000 cases of wine at a price of 310 euros per case. The total purchase price is 620,000 euros. Relevant exchange rates for the euro are as follows: Date September 15 September 30 October 31 Spot Rate $1.55 1.60 1.65 Call Option Premiun Forward Rate for October 31 to October (strike price 31 $1.55) $1.61 $0.055 1.64 0.090 1.65 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, and the company made payment on October 31. There was no attempt to hedge the exposure to foreign exchange risk. Prepare journal entries to account for this import purchase. b. Assume that the wine arrived on September 15, and the company made payment on October 31. On September 15, Vino Veritas entered into a 45-day forward contract to purchase 620,000 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. c. Vino Veritas ordered the wine on September 15. The wine arrived and the company paid for it on October 31. On September 15, Vino Veritas entered into a 45-day forward contract to purchase 620,000 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. d. The wine arrived on September 15, and the company made payment on October 31. On September 15, Vino Veritas purchased a 45- day call option for 620,000 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. e. The company ordered the wine on September 15. It arrived on October 31, and the company made payment on that date. On September 15, Vino Veritas purchased a 45-day call option for 620,000 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. Required A Required B Required C Required D Required E Assume that the wine arrived on September 15, and the company made payment on October 31. 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.) View transaction list View journal entry worksheet Debit Credit No 1 Date 09/15 General Journal Inventory Accounts payable (euro) 2 09/30 Foreign exchange loss Accounts payable (euro) 3 10/31 Foreign exchange loss Accounts payable (euro) 10/31 Foreign currency (euro) Cash 5 10/31 Accounts payable (euro) Foreign currency (euro) Required A Required B Required A Required B Required c Required D Required E Assume that the wine arrived on September 15, and the company made payment on October 31. On September 15, Vino Veritas entered into a 45-day forward contract to purchase 200,000 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.) Show less View transaction list View journal entry worksheet No Debit Credit Date 09/15 1 General Journal 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 5 10/31 Foreign exchange loss Accounts payable (euro) 10/31 Forward contract Gain on forward contract 10/31 Foreign currency (euro) Cash Forward contract 8 10/31 Accounts payable (euro) Foreign currency (euro) Required A Required ) Required A Required B Required C Required D Required E Vino Veritas ordered the wine on September 15. The wine arrived and the company paid for it on October 31. On September 15, Vino Veritas entered into a 45-day forward contract to purchase 200,000 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.) Show less View transaction list View journal entry worksheet No Date Debit Credit General Journal No journal entry required 1 09/15 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 7 10/31 Foreign currency (euro) Cash Forward contract 10/31 Inventory Foreign currency (euro) 9 10/31 Firm commitment Adjustment to net income View transaction list View journal entry worksheet Debit Credit No 1 Date 09/15 General Journal Inventory Accounts payable (euro) 2 09/15 Foreign currency option Cash 3 09/30 Foreign exchange loss Accounts payable (euro) 4 09/30 Foreign currency option Accumulated other comprehensive income 5 09/30 Accumulated other comprehensive income Gain on foreign currency option 09/30 Option expense Accumulated other comprehensive income 10/31 Foreign exchange loss Accounts payable (euro) 10/31 Foreign currency option Accumulated other comprehensive income 9 10/31 Accumulated other comprehensive income Gain on foreign currency option 10/31 Option expense Accumulated other comprehensive income 11 10/31 Foreign currency (euro) Cash Foreign currency option 12 10/31 Accounts payable (euro) Foreign currency (euro) Required A Required B Required C Required D Required E The company ordered the wine on September 15. It arrived on October 31, and the company made payment on that date. On September 15, Vino Veritas purchased a 45-day call option for 200,000 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.) Show less View transaction list View journal entry worksheet No Date Debit Credit 1 0 9/15 General Journal Foreign currency option Cash 2 09/30 Foreign currency option Gain on foreign currency option 3 09/30 Loss on firm comittment Firm commitment 10/31 Foreign currency option Gain on foreign currency option 5 10/31 Loss on firm comittment Firm commitment 10/31 Foreign currency (euro) Cash Foreign currency option 7 10/31 Inventory Foreign currency (euro) 8 10/31 Firm commitment Adjustment to net income View transaction list View journal entry worksheet Debit Credit No 1 Date 09/15 General Journal Inventory Accounts payable (euro) 2 09/15 Foreign currency option Cash 3 09/30 Foreign exchange loss Accounts payable (euro) 4 09/30 Foreign currency option Accumulated other comprehensive income 5 09/30 Accumulated other comprehensive income Gain on foreign currency option 09/30 Option expense Accumulated other comprehensive income 10/31 Foreign exchange loss Accounts payable (euro) 10/31 Foreign currency option Accumulated other comprehensive income 9 10/31 Accumulated other comprehensive income Gain on foreign currency option 10/31 Option expense Accumulated other comprehensive income 11 10/31 Foreign currency (euro) Cash Foreign currency option 12 10/31 Accounts payable (euro) Foreign currency (euro) Required A Required B Required C Required D Required E The company ordered the wine on September 15. It arrived on October 31, and the company made payment on that date. On September 15, Vino Veritas purchased a 45-day call option for 200,000 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.) Show less View transaction list View journal entry worksheet No Date Debit Credit 1 0 9/15 General Journal Foreign currency option Cash 2 09/30 Foreign currency option Gain on foreign currency option 3 09/30 Loss on firm comittment Firm commitment 10/31 Foreign currency option Gain on foreign currency option 5 10/31 Loss on firm comittment Firm commitment 10/31 Foreign currency (euro) Cash Foreign currency option 7 10/31 Inventory Foreign currency (euro) 8 10/31 Firm commitment Adjustment to net income