Merit & Family purchased engines from Canada for 34,000 Canadian dollars on March 10 with payment due on June 8. Also, on March 10, Merit acquired a 90-day forward contract to purchase 34,000 Canadian dollars at C$1 = $0.50. The forward contract was acquired to manage Merit & Family’s exposed net liability position in Canadian dollars, but it was not designated as a hedge. The spot rates were(a) March 10 C$1 = $ 0.49 (b)June 8 C$1 = $ 0.52
Required:
Prepare journal entries for Merit & Family to record the purchase of the engines, entries associated with the forward contract, and entries for the payment of the foreign currency payable.