Bulldog Enterprise, a U

Essay

Bulldog Enterprise, a U.S.firm, agreed on February 1, 2016, to buy gears from a Mexican firm for 75,000 pesos.Delivery is scheduled for May 1, 2016, with payment due at that time.On February 1, 2016, Bulldog also acquired a forward contract to buy 75,000 pesos on May 1, 2016.(The gears represent inventory to the U.S.firm.) Bulldog's year end is March 31.
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Required:
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Prepare the journal entries necessary for Bulldog Enterprise to record this activity.Assume that the following exchange rates existed:
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Discount rate 15%
$$\begin{array} { l l l } \text { Date } & \text { Spot Rate } & \text { Forward Rate } \\\hline \text { February 1, 2016 } & 1 \text { peso } = \$ 0.223 & 1 \text { peso } = \$ 0.227 \\\text { March 31,2016 } & 1 \text { peso } = \$ 0.228 & 1 \text { peso } = \$ 0.230 \\\text { May 1,2016 } & 1 \text { peso } = \$ 0.226 & 1 \text { peso } = \$ 0.226\end{array}$$