On November 1, 2014, Moddel Company (a U.S. corporation) entered into a 90-day forward contract to purchase 200,000 British pounds. The purpose of the forward contract is to hedge a commitment to purchase special equipment on January 30, 2015 from a British firm Jeckyl, Inc. The invoice price on the purchase commitment is denominated in British pounds. The forward contract is not settled net. Assume Moddel uses a 12% interest rate. Use a fair value hedge.
The relevant exchange rates are stated in dollars per pound:

Forward Rate
Spot Rate to Jan. 30, 2012
November 1, 2014 $1.32 $1.35
December 31, 2014 $1.47 $1.50
January 30, 2015 $1.55 -

a. What journal entry did Moddel record on November 1, 2014?
b. What journal entries did Moddel record on December 31, 2014?
c. What journal entries did Moddel record on January 30, 2015 if the purchase was made?

Answer rating: 100% (QA)

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