3.)Merit & Family purchased engines from Canada for 40,000 Canadian dollars on March 10 with payment due on June 8. Also, on March 10, Merit acquired a 90-day forward contract to purchase 40,000 Canadian dollars at C$1 = $0.50. The forward contract was acquired to manage Merit & Family’s exposed net liability position in Canadian dollars, but it was not designated as a hedge. The spot rates wereMarch 10C$1 = $0.49June 8C$1 = $0.52Required:Prepare journal entries for Merit & Family to record the purchase of the engines, entries associated with the forward contract, and entries for the payment of the foreign currency payable.1Record the foreign purchase of the engines. 2Record the entry for the 90-day forward exchange contract signed to receive Canadian dollars. 3Record the entry to revalue the foreign currency receivable to the current equivalent U.S. dollar value. 4Record the entry to revalue the foreign currency accounts payable to the current U.S. dollar value. 5Record the payment of U.S. dollars to an exchange broker for the forward contract. 6Record the receipt of Canadian dollars from the exchange broker. 7Record the settlement of the foreign currency payable. NoDate1March 10Inventory (or Purchases)Accounts payable (CS)2March 10No journal entry required3June 08No journal entry required4June 085June 08Answer is not complete.General JournalDebit19,600Credit19,600Foreign currency transaction lossAccounts payable (CS)Dollars payable to exchange broker ($)Cash6June 08Cash7June 08Foreign currency receivable from exchange broker (CS)Accounts payable (C$)Cash☑> >1,2001,20020,00020,00040,00040,00040,00040,000

Here is the final summary of journal entries in a table format:No.DateDescriptionDebitCredit1March…

No Date 1 March 10 Inventory (or Purchases) Accounts payable (CS) 2 March 10 No journal entry required 3 June 08 No journal entry required 4 June 08 5 June 08 Answer is not complete. General Journal Debit 19,600 Credit 19,600 Foreign currency transaction loss Accounts payable (CS) Dollars payable to exchange broker ($) Cash 6 June 08 Cash 7 June 08 Foreign currency receivable from exchange broker (CS) Accounts payable (C$) Cash ☑ > > 1,200 1,200 20,000 20,000 40,000 40,000 40,000 40,000

No Date 1 March 10 Inventory (or Purchases) Accounts payable (CS) 2 March 10 No journal entry required 3 June 08 No journal entry required 4 June 08 5 June 08 Answer is not complete. General Journal Debit 19,600 Credit 19,600 Foreign currency transaction loss Accounts payable (CS) Dollars payable to exchange broker ($) Cash 6 June 08 Cash 7 June 08 Foreign currency receivable from exchange broker (CS) Accounts payable (C$) Cash ☑ > > 1,200 1,200 20,000 20,000 40,000 40,000 40,000 40,000

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8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter8: Subprime Lending Fiasco-ethics Issues

Section: Chapter Questions

Problem 3.7EC

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March 10	C$1 = $0.49
June 8	C$1 = $0.52

Required:

Prepare journal entries for Merit & Family to record the purchase of the engines, entries associated with the forward contract, and entries for the payment of the foreign currency payable.

1

Record the foreign purchase of the engines.
2

Record the entry for the 90-day forward exchange contract signed to receive Canadian dollars.
3

Record the entry to revalue the foreign currency receivable to the current equivalent U.S. dollar value.
4

Record the entry to revalue the foreign currency accounts payable to the current U.S. dollar value.
5

Record the payment of U.S. dollars to an exchange broker for the forward contract.
6

Record the receipt of Canadian dollars from the exchange broker.
7

Record the settlement of the foreign currency payable.

No
Date
1
March 10
Inventory (or Purchases)
Accounts payable (CS)
2
March 10
No journal entry required
3
June 08
No journal entry required
4
June 08
5
June 08
Answer is not complete.
General Journal
Debit
19,600
Credit
19,600
Foreign currency transaction loss
Accounts payable (CS)
Dollars payable to exchange broker ($)
Cash
6
June 08
Cash
7
June 08
Foreign currency receivable from exchange broker (CS)
Accounts payable (C$)
Cash
☑
> >
1,200
1,200
20,000
20,000
40,000
40,000
40,000
40,000

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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