On July 1, 2019, North Inc *For Contracts Expiring on November 15, 2019
What Is the Merchandise

Multiple Choice

On July 1, 2019, North Inc., based in Alberta, ordered merchandise from an American supplier for US$600,000. Delivery was scheduled for the month of October, with payment to be made in full on November 15, 2019. Once the order was placed, North entered into a forward contract with its bank to purchase US$600,000 on the settlement date at the forward rate of CDN$1.3625. The forward contract was designated as a cash flow hedge of the cash flow required to settle with the American supplier.
The merchandise was received on October 1, 2019, when the spot rate was US$1 = CDN$1.3575. On October 31, the company's year-end, the spot rate was $1.3690. North purchased the U.S. dollars to pay its supplier on November 15, 2019 when the spot rate was CDN$1.3725. The forward rate to November 15, 2019, was CDN$1.365 on October 1 and CDN$1.37 on October 31.
A summary of the significant dates and exchange rates pertaining to this transaction are as follows:
$\begin{array}{|l|r|r|} \hline& \text { Spot Rates } & \text { Forward Rates } \\\hline \begin{array}{l}\text { July } 1,2019 \text { (Order date and } \\\text { hedge date) }\end{array} & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3445 & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3625 \\\hline \text { October } 1,2019 \text { (Delivery date) } & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3575 & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.365 \\\hline \text { October 31,2019(Year-end) } & \text { CDN\$1.369 } & \text { CDN\$1.37 } \\\hline \begin{array}{l}\text { November } 15,2019 \text { (Settlement } \\\text { date) }\end{array} & \text { US\$1=CDN\$1.3725 } & \text { US\$1=CDN\$1.3725 }\\\hline\end{array}$ *for contracts expiring on November 15, 2019
What is the journal entry required to record the ordering of North's merchandise?

A) No entry is required.
B)
$$\begin{array} { | l | r | r | } \hline \text { Merchandise inventory } & \$ 806,700 \\\hline \text { Account payable } & & \$ 806,700 \\\hline\end{array}$$
C) $$\begin{array} { | l | r | r | } \hline \text { Merchandise irventory } & \$ 817,500 \\\hline \text { Account payable } & & \$ 817,500 \\\hline\end{array}$$
D) $\begin{array}{|l|r|r|}\hline \text { Merchandise inventory } & \$ 814,500 & \\\hline \text { Account payable } & & \$ 814,500 \\\hline\end{array}$