What are the journal entries in the parents book (all assume in US $) on January 1, March 31 and April 30, 2001 associated with the illustrative example described in Exhibit 1?

Situation: On January 1, 2001, Machinery International (the parent) forecasts with a high degree of probability that its British subsidiary will pay it an one million pound (BP) royalty on April 30, 2001. The parent enters into a forward exchange contract on January 1, 2001 to sell BP one million on April 30,2001 at $1=BP0.60. Assume that the following exchange rates and fair values of the forward contract are: Forward Rates for April 30, 2001 Date Spot Rates Fair Value January 1, 2001 $1 = BP 0.60 $1 = BP 0.60 -O- March 31, 2001 $1 = BP 0.64 $1 = BP 0.65 $127,000 gaina April 30, 2001 $1 = BP 0.68 N/A $196,079 gainb aThe fair value is based on a dealer quote. It generally represents the present value of expected future cash flows. (BP 1,000,000 = BP 0.60 = $1,666,667) less (BP 1,000,000 = BP 0.65 = $1,538,462) = $128,205 discounted at 12% for one month = $127,000. b(BP 1,000,000 = BP 0.60 = $1,666,667) less (BP 1,000,000 = BP 0.68 = $1,470,588) = $196,079. Also assume that the forward rate equals the contract rate on January 1, 2001. Situation: On January 1, 2001, Machinery International (the parent) forecasts with a high degree of probability that its British subsidiary will pay it an one million pound (BP) royalty on April 30, 2001. The parent enters into a forward exchange contract on January 1, 2001 to sell BP one million on April 30,2001 at $1=BP0.60. Assume that the following exchange rates and fair values of the forward contract are: Forward Rates for April 30, 2001 Date Spot Rates Fair Value January 1, 2001 $1 = BP 0.60 $1 = BP 0.60 -O- March 31, 2001 $1 = BP 0.64 $1 = BP 0.65 $127,000 gaina April 30, 2001 $1 = BP 0.68 N/A $196,079 gainb aThe fair value is based on a dealer quote. It generally represents the present value of expected future cash flows. (BP 1,000,000 = BP 0.60 = $1,666,667) less (BP 1,000,000 = BP 0.65 = $1,538,462) = $128,205 discounted at 12% for one month = $127,000. b(BP 1,000,000 = BP 0.60 = $1,666,667) less (BP 1,000,000 = BP 0.68 = $1,470,588) = $196,079. Also assume that the forward rate equals the contract rate on January 1, 2001