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Pacifico Company, a U.S.-based importer of beer and wine, purchased 1,300 cases of Oktoberfest-style beer from a German supplier for 299,000 euros. Relevant U.S. dollar exchange rates for the euro are as follows:

The company closes its books and prepares third-quarter financial statements on September 30. B. Assume that the beer arrived on August 15, and the company made payment on October 15. On August 15, the company entered into a two-month forward contract to purchase 299,000 euros. The company designated the forward contract as a cash flow hedge of a foreign currency payable. Forward points are excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis. Prepare the following journal entries to account for the import purchase and foreign currency forward contract:

Record the foreign exchange loss for the third quarter.

Record the change in the fair value of the forward contract on October 15 when the spot rate is $1.23 per Euro.

To record a foreign exchange loss on the forward contract to offset the foreign exchange gain on the accounts payable.

Record the foreign exchange loss for the fourth quarter.

Record purchase of foreign currency to make payment to German supplier.

Record payment made to German supplier on October 15 when the spot rate is $1.23 per Euro.

\begin{tabular}{lccc|} & & Call Option Premium \\ Date & Spot Rate & Forward Rate & October15toOctober15 \\ August 15 & $1.15 & $1.21 & $1 price $1.15 ) \\ September 30 & 1.20 & 1.24 & 0.05 \\ October 15 & 1.23 & 1.23 (spot) & N/A \\ \hline \end{tabular}

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