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Forward exchange contract designated as a cash flow hedge of a foreign$-$currency$-$denominated

forecasted sale of inventory, strengthening $)$

On October $15,2018,$ our U$.$S$.-$based company received a cancelable purchase order from a

Luxembourg$-$based retailer. The purchase order states that our company will sell to the Luxembourgish

company, on February $1,2019,70,000$ units of an inventory item with a sales price of $11\mathrm{.}00$ each. The

purchase order also specifies that the Luxembourgish company will make payment in Euros on that

same date. Our company does recurring business with the Luxembourgish company; however, the

cancelable purchase order includes no monetary penalties for nonperformance. Also, on October $15,$

$2018,$ our company entered into a contract with a foreign currency exchange broker to sell $770,000($for

settlement on February $1,2019)$ to mitigate the risk of exchange rate fluctuation from this forecasted

sale. We will receive $$1\mathrm{.}23$ per $1,$ which is the forward rate on October $15,2018,$ for settlement on

February $1,2019.$ Our company's functional currency is the U$.$S$.$ dollar and our forward exchange

contract qualifies as a cash flow hedge. The relevant exchange rates and related balances for the period

from October $15,2018,$ to February $1,2019,$ are as follows:

${?}^b$ Ignore discounting in the computation of fair values.

a$.$ Prepare the journal entries to record the sale and all adjustments required for the forecasted sale and

forward contract at October $15,2018,$ December $31,2018,$ and February $1,2019.$

Note: If no entry is required, select $"$No entry" as your answers under Description and leave the debit

and credit answers blank $($zero$).$

Hedged Transaction

b$.$ Reconcile to the forward rate at the forward contract's inception the net cash received for both the

sale of goods and the settlement of the forward$-$contract derivative.

Net cash received for sale of goods and settlement of the forward contract derivative is:

$Answer

c$.$ What amount of sales was recognized in the quarter ending December $31,2018?$

Note: Do not use a negative sign with any of your answers below.

$Answer

What amount of sales was recognized in the quarter ending March $31,2019?$

$Answer

What is the total amount of sales recognized across the quarters ending December $31,2018,$ and March

$31,2019?$

$ Answer

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