Accounting for forward foreign exchange contract is a fair value hedge. On September 1, 2008, Turner Corporation places an order with a Japanese supplier for manufacturing equipment for delivery on June 30, 2009. The purchase is denominated in Japanese yen in the amount of ¥5,200,000. Turner Corporation purchases a forward foreign exchange contract on September 1. 2008, for the purchase of ¥5,200,000 at a forward foreign exchange rate for settlement on June 30, 2009, of $1 = ¥102. Turner Corporation designates the forward foreign exchange contract as a fair value hedge. The forward foreign exchange rate on December 31, 2008, for settlement on June 30, 2009, is $I = ¥l00, and the actual exchange rate on June 30, 2009, is $I = ¥95. The following summarizes this information:

a. Using a discount rate of 8% per year, what is the fair va1ue of the foreign exchange contract on December 31, 2008? Is the amount an asset or a liability?
b. What amount would Turner Corporation report on its December 31, 2008, balance sheet related to its commitment to purchase the equipment?
c. What is the fair value of the foreign exchange contract on June 30, 2009, just before settling the transaction?
d. Give the journal entry on June 30, 2009, to purchase the equipment.
e. Give the 1ournal entry on June 30, 2009, to settle the forward foreign exchangeContract.

Type of Exchange Rate Equivalent U.S. Dollar Amount Exchange Rate Date Japanese Yen September 1, 2008..... Forward Rate for June 30, 2009, $1 - 102 5,200,000 $50,980 Settlement December 31, 2008..... Forward Rate for June 30, 2009, $1 - 100 5,200,000 $52,000 Settlement Actual June 30, 2009 . $54,737 $1 - 95 5,200,000