A U.S. oil exploration company drilling in the Gulf of Mexico wants to purchase

$20 million of drilling equipment from a German tool manufacturing company. Once the transaction agreement is complete, the drilling equipment will be shipped to the U.S. company’s drilling assembly operation facility in Houston. Shipping time is expected to take 30 days. Both companies agree to finance the transaction with a banker’s acceptance in which the U.S. company’s bank will guarantee the U.S. company’s payment of $20 million with a letter of credit to be sent to the German company’s bank. Upon notification of the receipt of the letter of credit, the German company will ship the equipment and take payment from its bank. Explain how the rest of the transactions between the U.S. and German companies would take place and how the banker’s acceptance would be created.