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Which journal entry under the assumption

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On June 1, Year 3, STL Corp. (STLC) ordered merchandise from a supplier in Turkey for Turkish lira (TL) 209,000. The goods were delivered on September 30, with terms requiring cash on delivery. On June 2, Year 3, STLC entered a forward contract as a cash flow hedge to purchase TL 209,000 on September 30, Year 3, at a rate of $0.82. STLC's year-end is June 30.

On September 30, Year 3, STLC paid the foreign supplier in full and settled the forward contract.

Exchange rates were as follows:

Spot Rates
Forward Rates*
June 1 and 2, Year 3
TL1 = $0.790
TL1 = $0.820
June 30, Year 3
TL1 = $0.780
TL1 = $0.815
September 30, Year 3
TL1 = $0.830
TL1 = $0.830

For contracts expiring on September 30, Year 3.

Problem 1: Which journal entry under the assumption that no forward contract was entered would be correct?

Option 1. June 1, Year 3 DR Inventory 165,110
CR Cash 165,110

Option 2. Sep 30, Year 3 DR Inventory 171,380
CR Cash 171,380

Option 3. June 30, Year 3 DR Inventory 173,470
CR Commitment liability 173,470

Option 4. Sep 30, Year 3 DR Inventory 173,470
CR Cash 173,470

Reference no: EM132966154

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