Question: Problem 3: A U.S. company issues a purchase order on April 1 to buy merchandise from an Australian supplier for A$100,000, to be paid on

Problem 3:

A U.S. company issues a purchase order on April 1 to buy merchandise from an Australian supplier for A$100,000, to be paid on August 1. To hedge the foreign exchange risk, on April 1 the U.S. company enters a forward purchase contract for A$100,000 with an August 1 delivery date. On May 1, the company takes delivery of the merchandise. On August 1 the company purchases the Australian dollars through the forward contract and pays the supplier. On August 15, the company sells the merchandise to a U.S. customer for $95,000 in cash. Assume the company records cost of goods sold when the sale is made. The companys fiscal year ends June 30. Relevant rates ($/A$) are as follows:

	Spot Rate	Forward Rate for August 1 Delivery
April 1	$0.776	$ 0.774
May 1	0.772	0.770
June 30	0.765	0.762
August 1	0.778	0.778

Required

Make the journal entries to record the above events (April 1, May 1, June 30, August 1, and August 15), including appropriate fiscal year-end adjusting entries.

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