On Oct 1, ABC corp purchased equipment from John Sales Corp for 80,000 UK Pounds. Payment will be made on Jan 5. On Oct 1, ABC Corp also entered into a forward contract to 

On Oct 1, ABC corp purchased equipment from John Sales Corp for 80,000 UK Pounds. Payment will be made on Jan 5. On Oct 1, ABC Corp also entered into a forward contract to

____________ (buy/sell) 80,000 Pounds at a rate of $1.28 per pound.
Assume that accounting year ends on Dec 31.
Spot rates and forward rates for the relevant dates are given below:
Dates Spot Rates AP Forward Rates FC Receivable
01-Oct $1.25 $100,000 $1.28 $102,400
31-Dec $1.30 $104,000 $4,000 $1.32 $105,600
05-Jan $1.36 $108,800 ($4,800) $1.36 $108,800
Required: Prpeare all the necessary journal entries for the purchase of equipment, the forward contract and the settlement on Jan 5.
01-Oct   Equipment 100,000
       AP 100,000
01-Oct   FC Rec 102,400
       Dollars Payable 102,400  (this is consant)
31-Dec Tr Loss 4,000 (104000 – 100,000)
     AP 4,000
31-Dec   FC Rec $3,200
    Transaction Gain 3,200
05-Jan  Transaction Loss $4,800
       AP 4,800
05-Jan FC Rec $3,200
        Transaction Gain 3,200
05-Jan Dollars Payable 102,400
      Cash 102,400
416800
05-Jan Investment in FC 108,800
     FC Receivable 108,800
05-Jan AP 108,800
  Investment in FC 108,800