On October 1, 2021, Rondeau Company purchased inventory from Gateway Corporation for euro (€) 200,000, with payment due on February 1, 2022. On October 1, 2021, Gateway delivered the inventory to Rondeau from its Sterling warehouse. Rondeau immediately hedged € 175,000 of the payable by buying a forward contract (at no cost) expiring on February 1, 2022. The following exchange rates occurred during the period (the forward rates shown all pertain to forward contracts expiring on February 1, 2022): REQUIRED: a) b) October 1, 2021 December 31, 2021 February 1, 2022 c) Spot Rate €1 = C$1.40 €1 = C$1.48 €1 = C$1.52 Forward Rate €1 = C$1.50 €1 = C$1.59 €1 = C$1.52 Indicate how the hedge entered into by Rondeau on October 1, 2021 should be classified. Support your answer with facts from the question and discuss how effective this hedge would be. (2 marks) Prepare the journal entries or disclosure to be recorded by Rondeau for the accounts payable and the fair value hedge on the following dates: (8 marks) į) October 1, 2021 11) December 31, 2021 iii) February 1, 2022 Calculate the exchange gain or loss on both the accounts payable and the forward contract to be reported for the year ended December 31, 2022 (January 1 - December 31, 2022)
