# Question: Medical Distributors Inc is a U S company that buys and

Medical Distributors, Inc. is a U.S. company that buys and sells used medical equipment throughout the United States and Canada. During the month of June, the company had the following transactions with Canadian parties:
1. Purchased used equipment on June 1 from a hospital located in Toronto for 220,000 Canadian dollars (CA\$) payable in 45 days. On the same day, the company paid \$1,000 for a call option to buy 220,000 Canadian dollars during July at a strike price of 1 CA\$ = \$0.726. The option had a fair value of \$3,200 on June 30. The hedge was designated as a fair value hedge.
2. Sold equipment on June 1 for 300,000 Canadian dollars to be paid in 30 days. At the same time, the company purchased a forward contract to sell the Canadian dollars in 30 days and the hedge was designated as a fair value hedge.
3. Committed to buy equipment on June 15 from a Montreal health care provider for 400,000 Canadian dollars in 45 days. At the same time, the company purchased a forward contract to buy 400,000 Canadian dollars in 45 days.
4. Paid 30,000 Canadian dollars on June 20 to refurbish the equipment purchased on June 1.
5. Sold the equipment purchased on June 1 on June 20 for 310,000 Canadian dollars to be received in 30 days.
6. Collected the 300,000 Canadian dollars on June 30 from the sale on June 1.
Selected spot and forward rates are as follows:
Required
Prepare all of the necessary journal entries to record the above activities during the month of June. Changes in the value of the commitment are based on changes in forward rates. All necessary discounting should be determined using a 6% discount rate.

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