Reference no: EM133115581

Question 1 - On June 1, Year 3, Claring Company ordered table linens from a supplier in India for Indian Rupee (Rs) 217,000. The table linens were delivered on September 30, with terms requiring cash on delivery. On June 2, Year 3, Claring entered into a foreign contract as a cash flow hedge to purchase Rs 217,000 on September 30, Year3 at a rate of $0.90. Claring's year end is June 30.

On September 30, Claring paid the foreign supplier in full and settled the forward contact.

Exchange rates were as follows:

Spot Rate Forward Rate

June 1 and June 2, Year 3 Rs1 = $0.870 Rs1 = $0.900

June 30, Year 3 Rs1 = $0.860 Rs1=$0.895

September 30, Year 3 Rs1 = $0.910 Rs1=$0.910

Required - Prepare all journal entries required to record the transaction described above.

Question 2 - Using the information from Question 1, prepare all of the necessary journal entries to record the transaction, assuming that the forward contract was designated as a fair value hedge.