On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,030,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,030,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows: DateSpot RateForward Rate(to January 31, 2021)October 1, 2020$0.26 $0.30 December 31, 2020 0.29 0.33 January 31, 2021 0.31 N/A Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored. Prepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale. Complete this question by entering your answers in the tabs below.Required ARequired BPrepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale. (Do not roundintermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)View transaction listX:....Record the sales agreement.9>Record entry for forward contract entered into by MertagCompany.23Record the forward contract and recognize the change infair value.Record the firm commitment and recognize the change inCreditfair value.5Record the entry to adjust the fair value of the forwardcontract.6 Record the entry to adjust the fair value of the firm Complete this question by entering your answers in the tabs below.Required ARequired BPrepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale. (Do not roundintermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)View transaction listX:94Record the firm commitment and recognize the change infair value.Record the entry to adjust the fair value of the forwardcontract.Record the entry to adjust the fair value of the firmcommitment.Credit7Record the sale and receipt of PLN.8Record settlement of forward contract.Record entry to close the firm commitment.

A journal entry is a form of accounting entry that is used to report a business transaction in a…

Answered: On October 1, 2020, Mertag Company (a…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

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Problem 2Q

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On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,030,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,030,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows:

Date	Spot Rate	Forward Rate (to January 31, 2021)
October 1, 2020	$	0.26	$	0.30
December 31, 2020		0.29		0.33
January 31, 2021		0.31		N/A

Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored.

Prepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale.

Complete this question by entering your answers in the tabs below.
Required A
Required B
Prepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale. (Do not round
intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
View transaction list
X:
....
Record the sales agreement.
9
>
Record entry for forward contract entered into by Mertag
Company.
2
3
Record the forward contract and recognize the change in
fair value.
Record the firm commitment and recognize the change in
Credit
fair value.
5
Record the entry to adjust the fair value of the forward
contract.
6 Record the entry to adjust the fair value of the firm

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