Problem

Crystal Exporting Co. is a U.S. wholesaler engaged in foreign trade. The following transactions are representative of its business dealings. The company uses a periodic inventory system and is on a calendar-year basis. All exchange rates are direct quotations.

Dec. 1

Crystal Exporting purchased merchandise from Changs Ltd., a Hong Kong manufacturer. The invoice was for 350,000 Hong Kong dollars, payable on April 1. On this same date, Crystal Exporting acquired a forward contract to buy 350,000 Hong Kong dollars on April 1 for $0.1314.

Dec. 29

Crystal Exporting sold merchandise to Zintel Retailers for 290,000 Hong Kong dollars, receivable in 90 days. No hedging was involved.

1-Apr

Crystal Exporting received 290,000 Hong Kong dollars from Zintel Retailers.

1-Apr

Crystal Exporting submitted full payment of 350,000 Hong Kong dollars to Changs, Ltd., after obtaining the 350,000 Hong Kong dollars on its forward contract.

Spot rates and the forward rates for the Hong Kong dollar were as follows:

Spot Rate

Forward Rate for

April 1 Delivery

Dec. 1

$0.13

$0.13

Dec. 29

0.124

0.1305

Dec. 31

0.1259

0.1308

1-Apr

0.143

(a) Prepare journal entries for the transactions including the necessary adjustments on December 31.

(Credit account titles are automatically indented when the amount is entered. Do not indent manually.

If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)