Question: Assume the same facts as in P8- 13 except that Pinware Wholesalers Inc. (Pinware) must order the watches two months in advance of expected delivery.

Assume the same facts as in P8- 13 except that Pinware Wholesalers Inc. (Pinware) must order the watches two months in advance of expected delivery. On March 1, 20X3, Pinware ordered Swiss watches from a supplier in Switzerland for 400,000 Swiss francs (CHF) when the spot rate was CHF1 = C$ 0.95. The invoice called for payment to be made on August 31, 20X3. On March 1, 20X3, Pinware also entered into a forward contract with a bank to hedge the commitment by agreeing to purchase CHF400,000 on August 31, 20X3, at a rate of CHF1 = C$ 0.955. Pinware takes delivery of the watches on May 1, 20X3. All other information is the same as in P8- 13.

Required
1. Prepare journal entries to record all of the transactions, including any adjustments required on June 30, 20X3, assuming that Pinware does not use hedge accounting.
2. Prepare journal entries to record all of the transactions, including any adjustments required on June 30, 20X3, assuming that Pinware designates the hedge a fair-value hedge.
3. Prepare journal entries to record all of the transactions, including any adjustments required on June 30, 20X3, assuming that Pinware designates the hedge a cash-flow hedge.

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1 March 1 20X3 No entry May 1 20X3 Inventory or Purchases 372000 Accounts payable 372000 400000 093 372000 June 30 20X3 Accounts payable 4000 Exchange gain 4000 400000 092 368000 372000 4000 Exchange ... View full answer

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