Question: E 13-6 Purchase commitment, foreign currency hedge, net settlement Dimple AG ordered merchandise of 20,000 from US Clark Ltd. on September 1, 2014, when the

E 13-6 Purchase commitment, foreign currency hedge, net settlement Dimple AG ordered merchandise of €20,000 from US Clark Ltd. on September 1, 2014, when the spot rate for the euro was $0.77. The merchandise was to be delivered on October 1, 2014, when the spot rate was $0.79. On the transaction date, US Clark entered into a forward contract in order to fix the sales price in euro. The 30-day forward rate was $0.75 on September 1, 2014, and $0.78 on October 1, 2014.

REQuIRED: Prepare the journal entries to record the transaction above if net settlement of the contract is not allowed.

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