Required A1. Record the sales agreement. 10.01.20202.Record entry for forward contract entered into by Mertag Company. 10.01.20203. Record the forward contract and recognize the change in fair value. 12.31.20204. Record the firm commitment and recognize the change in fair value. 12.31.20205. Record the entry to adjust the fair value of the forward contract. 01.31.20216. Record the entry to adjust the fair value of the firm commitment. 01.31.20217. Record the sale and receipt of PLN. 01.31.20218. Record settlement of forward contract. 01.31.20219.Record entry to close the firm commitment. 01.31.2021Required B Determine the net benefit, if any, realized by Mertag from entering into the forward contract. (Do not round intermediate calculations. Negative amount should be entered with a minus sign.)Net benefit: On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,000,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,000,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows:| Date | Spot Rate | Forward Rate (to January 31, 2021) ||--------------------|-----------|------------------------------------|| October 1, 2020 | $0.25 | $0.29 || December 31, 2020 | $0.28 | $0.31 || January 31, 2021 | $0.30 | N/A |Mertag designates 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, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored.a. Prepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale.b. Determine the net benefit, if any, realized by Mertag from entering into the forward contract.---### Instructions:**Prepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale.** *(Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)*[View transaction list] **Journal Entry Worksheet**---1. **Journal Entry Input Section** - **Step Tabs:** 1 2 3 4 5 6 7 8 9 (with navigation arrows) - **Instruction Box:** "Record the sales agreement." - **Note:** "Enter debits before credits."2. **Journal Table** - **Columns:** - Date - General Journal - Debit - Credit - **Row Example:** - Date: 10/01/2020 - Empty fields for General Journal, Debit, and Credit entries3. **Buttons:** - "Record entry" - "Clear entry" - "View general journal"---**Instructions:**a. Prepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale.b. Determine the net benefit, if any, realized by Mertag from entering into the forward contract.---**Net Benefit Calculation Section:**- **Prompt:** "Complete this question by entering your answers in the tabs below."- **Tabs:** - Required A - Required B- **Calculation Prompt:** - "Determine the net benefit, if any, realized by Mertag from entering into the forward contract." - *Note:* "Negative amount should be entered with a minus sign. Do not round intermediate calculations."- **Input Box:** - Placeholder for "Net benefit"- **Navigation:** - "< Required A" - "Required B >"

Sale of goods to Poland on 01.10.2020 Forward rate $0.29 Spot rate $0.25 As per the information…

Answered: On October 1, 2020, Mertag Company (a…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q