On Oct 1, ABC corp purchased equipment from John Sales Corp for 80,000 UK Pounds. 

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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
05-Jan Investment in FC 108,800
     FC Receivable 108,800
05-Jan AP 108,800
  Investment in FC 108,800