Part 1: Using the Assignment Option 2 spreadsheet (linked at the bottom of this page), complete the following hedging transaction.

Required: Prepare the journal entries for a cash flow hedge.

Follow instructions from the worksheet carefully. Use formulas to enter amounts and data. Show details of your calculations and processes. Explain each journal entry or why one was omitted

Journal Entries for Hedging a Forecasted Foreign Currency Transaction: A Foreign Currency Cash Value Hedge
Journal Entries:										Debit	Credit
A		Foreign Currency Receivable from Exchange Broker
OCT 01 20x7			Dollars Payable to Exchange Broker($)
		(Record signed forward exchange contract for receipt of 5,000 Euro in 210 days)
B.
11/1/20x7		Foreign Currency Receivable (EURO)
			Other Comprehensive Income
		(Record adjustment of forward contract to fair Value)
11/1/20x7		Inventory
			Accounts Payable (Euro)
12/31/20x7		Foreign Currency Receivable (EURO)
			Foreign Currency Gain
12/31/20x7		Foreign Currency Loss
			Accounts Payable
4/28/20x8
		Foreign Currency loss
			Foreign Currency Receivable
		Accts Payable
			Foreign Currency Gain
4/28/20x8
		Dollars Payable to Broker
			Cash
		Foreign Currency Units
			Foreign Currency Rec
		Acct Payable
			Foreign Currency Units
		Other Comprehensive Income
			Cost of Goods Sold
		Cost of Good Sold
			Inventory

Journal Entries for Hedging a Forecasted Foreign Currency Transaction: A Foreign Currency Cash Value Hedge
Information:
1).	Push Corp operates in the United States. It uses the Euro for local currency transactions.
2).	On Oct 01, 20x7, Push Corp orders inventory items from German Corporation.
3).	Within 30 days, the delivery of the German inventory parts will take place, Nov 1, 20x7.
4).	The contract price is Euro 5,000 to be paid in 180 days, 6 months.
5).	On Oct 01, 20x7, Push Corp hedges its foreign currency payable commitment with a forward exchange contract to receive Euro 5,000 in 210 days (30+180).
6).	The purchase of inventory is forecasted for Nov 20x7, but this is not a binding agreement.
7).	Relevant exchange Rates
				Spot Rate		Forward Exchange Rate
		10/1/20x7		1.1		1.25		210 days
		11/1/20x7		1.15		1.3		180 days
		12/31/20x7		1.2		1.35		120 days
		4/28/20x8		1.15		0		0