A US Company Issues a Purchase Order on April 1 to to Buy

Essay

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 $95,000 in cash. Assume the company records cost of goods sold when the sale is made. The company's fiscal year ends June 30. Relevant rates ($/A$) are as follows:
$$\begin{array} { | l | c | c | } \hline & \text { Spot Rate } & \begin{array} { c } \text { Forward Rate for } \\\text { August 1 Delivery }\end{array} \\\hline \text { April 1 } & \$ 0.776 & \$ 0.774 \\\hline \text { May 1 } & 0.772 & 0.770 \\\hline \text { June 30 } & 0.765 & 0.762 \\\hline \text { August 1 } & 0.778 & 0.778 \\\hline\end{array}$$ Required
Make the journal entries to record the above events, including appropriate fiscal year-end adjusting entries.