On December 1, 2020, Brown Inc, a US firm, is seeking to acquire Faulkland Islands Pounds (FKP) for an upcoming future transaction. They determine they need to convert 200,000 FKP to be delivered on January 31, 2019. The exchange rate on December 1st is 1 FKP is equal to $1.27 US. However, the contract will require a premium for future contract totaling $1.34 on date of origination (forward contract rate).

The exchange rate on 12/31 (Brown’s fiscal year end) is $1.32. The exchange rate on 1/31 is $1.37.

Required:

Show the needed journal entries for:

Dec 1

Dec 31

Jan 31