On July 1, 2013, Great White North (GWN) Inc. purchased merchandise from a supplier in the U.S. for $800,000 with terms requiring full payment by October 31, 2013. On July 2, GWN entered into a forward contract to purchase $800,000 U.S. on October 31, 2013 at a rate of $1.2275CDN. The forward contract was designated as a hedge of the fair value of the amount due to the supplier. On October 31, GWN paid its supplier in full. Selected dates and spot rates are shown below: GWN has a July 31st year end. On that date the forward rate for US dollars for three months was CDN $1.2225. Prepare the journal entries assuming that no forward contract was entered into.

Question

On July 1, 2013, Great White North (GWN) Inc. purchased merchandise from a supplier in the U.S. for $800,000 with terms requiring full payment by October 31, 2013. On July 2, GWN entered into a forward contract to purchase $800,000 U.S. on October 31, 2013 at a rate of $1.2275CDN. The forward contract was designated as a hedge of the fair value of the amount due to the supplier. On October 31, GWN paid its supplier in full. Selected dates and spot rates are shown below:  GWN has a July 31st year end. On that date the forward rate for US dollars for three months was CDN $1.2225. Prepare the journal entries assuming that no forward contract was entered into.

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The Answer of On July 1, 2013, Great White North (GWN) Inc. purchased merchandise from a supplier in the U.S. for $800,000 with terms requiring full payment by October 31, 2013. On July 2, GWN entered into a forward contract to purchase $800,000 U.S. on October 31, 2013 at a rate of $1.2275CDN. The forward contract was designated as a hedge of the fair value of the amount due to the supplier. On October 31, GWN paid its supplier in full. Selected dates and spot rates are shown below:  GWN has a July 31st year end. On that date the forward rate for US dollars for three months was CDN $1.2225. Prepare the journal entries assuming that no forward contract was entered into.