On September 1, 2008, Ramus Company purchased machine parts from Ho Man Tin Company for 6,000,000 Hong Kong dollars to be paid on January 1, 2009. The exchange rate on September 1 is HK$7.7 = $1. On the same date, Ramus enters into a forward contract and agrees to purchase HK$6,000,000 on January 1, 2009, at the rate of HK$7.7 = $1.
Make all journal entries necessary on Ramus' books on three dates-September 1, 2008, December 31, 2008, and January 1, 2009-to record this purchase and the forward contract. On December 31, 2008, and on January 1, 2009, the exchange rate is HK$8.0 = $1. Ramus uses a perpetual inventory system.