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XYZ manufactures and distributes leather furniture to various companies in Europe. On April 2, 2006, XYZ entered into a sales contract with a company in Germany to sell 1,000 sofas. The contract price is 2,000 per sofa. Five hundred sofas are to be delivered in May 15, 2006, and the remaining half is to be delivered on December 20, 2006. Payment is due in two instalments, with half due on August 31, 2006, and the remaining half due January 30, 2007. However, the customer has the right to cancel the contract with 30 days' notice.

XYZ entered into a forward contract to hedge against the euro exchange rate for 1 million, each coming due on January 30, 2007. XYZ has an October 31 year-end.

Delivery of the furniture occurred on the dates specified and the company collected the receivables due

and settled the forward contract January 30, 2007.

The exchange rates were as follows:

Canadian equivalent of euro	Spot rate	Forward rate to January 30, 2007
April 2, 2006	1.50	1.54
June 30, 2006	1.51	1.57
August 31, 2006	1.53	1.58
October 31, 2006	1.55	1.56
December 20, 2006	1.59	1.61
January 30, 2007	1.63	settled

Required:

Assume that the forward contract is designated as a cash flow hedge, since the sale is highly probable. Prepare the journal entries to record the sales and the hedge. Use the net method to record the journal entries. XYZ reports under IFRS.

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