On December 1, 2017, Sizzler Foods, a U.S. company, purchased merchandise from a Hong Kong supplier at a price of HK$18,000,000, payable in three months in Hong Kong dollars. To hedge its exposed liability position, Sizzler entered a forward contract for purchase of HK$18,000,000 on March 1, 2018. On March 1, Sizzler closed the forward contract and used the Hong Kong dollars to pay its supplier. Sizzler's accounting year ends January 31.

Exchange rates ($/HK$) are as follows:

	Spot rate	Forward rate for delivery March 1, 2018
December 1, 2017	$0.1291	$0.1295
January 31, 2018	0.1301	0.1306
March 1, 2018	0.1305	--

Prepare the journal entries Sizzler Foods made on December 1, 2017 and March 1, 2018 to record the above transactions, as well as its end-of-year adjusting entries on January 31, 2018.

Account titles from drop down:

Investment in forward contract

Inventory

Accounts Payable

Exchange loss

Exchange gain

Foreign currency

Transcribed Image Text:

Date 12/01/17 01/31/18 03/01/18 General Journal Description To record goods purchased. To adjust accounts payable. To adjust accounts payable. + + + → To restate forward contract to current fair value. → ♦ To record payment to the supplier. ♦ + + To restate forward contract to current fair value. ♦ + Cash To record settlement of the forward contract. ♦ + Debit Credit Date 12/01/17 01/31/18 03/01/18 General Journal Description To record goods purchased. To adjust accounts payable. To adjust accounts payable. + + + → To restate forward contract to current fair value. → ♦ To record payment to the supplier. ♦ + + To restate forward contract to current fair value. ♦ + Cash To record settlement of the forward contract. ♦ + Debit Credit