XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: \[\begin{array} { | l | l | } \hline \text { Jaruary } 1,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1500 \\ \hline \text { Decernber } 31,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1490 \\ \hline \text { December } 31,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.1485 \\ \hline \text { December } 31,2021 & \text { US } \$ 1 = \text { CDN } \$ 1.1483 \\ \hline \text { December } 31,2022 & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\ \hline \end{array}\] The average rates in effect for 2019 and 2020 were as follows: \[\begin{array} { | l | c | } \hline 2019 : & \text { US } \$ 1 = \text { CDN } \$ 1.1493 \\ \hline 2020 : & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\ \hline \end{array}\] What is the amount of foreign exchange gain or loss recognized on the 2020 Income Statement as a result of revaluing the loan payable?

A) $2,500 loss B) $800 loss C) $800 gain D) $2,500 gain A) $2,500 loss B) $800 loss C) $800 gain D) $2,500 gain

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: \[\begin{array} { | l | c | } \hline \text { Jaruary } 1,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1500 \\ \hline \text { December } 31,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1490 \\ \hline \text { December } 31,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.1485 \\ \hline \text { December } 31,2021 & \text { US } \$ 1 = \text { CDN } \$ 1.1483 \\ \hline \text { December } 31,2022 & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\ \hline \end{array}\] The average rates in effect for 2019 and 2020 were as follows: \[\begin{array} { | l | l |} \hline \text { 2019: } & \text { US } \$ 1 = \text { CDN } \$ 1.1493 \\ \hline 2020 : & \text { US } \$ 1 = \text { CDN } \$ 1.1487\\ \hline \end{array}\] What is the amount of the foreign exchange gain or loss recognized on the 2019 Income Statement as a result of revaluing the loan payable?

A) A CDN$10,000 loss B) A CDN$5,000 loss C) A CDN$5,000 gain D) A CDN$10,000 gain A) A CDN$10,000 loss B) A CDN$5,000 loss C) A CDN$5,000 gain D) A CDN$10,000 gain

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: \[\begin{array} { | l | c | } \hline \text { Jaruary } 1,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1500 \\ \hline \text { December } 31,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1490 \\ \hline \text { Decernber } 31,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.1485 \\ \hline \text { Decerrber } 31,2021 & \text { US } \$ 1 = \text { CDN } \$ 1.1483 \\ \hline \text { Decermber } 31,2022 & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\ \hline \end{array}\] The average rates in effect for 2019 and 2020 were as follows: \[\begin{array} { | l | c | } \hline 2019 : & \text { US } \$ 1 = \text { CDN } \$ 1.1493 \\ \hline 2020 : & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\ \hline \end{array}\] What is the amount of interest expense (in Canadian Dollars) recorded for 2020?

A) $249,920 B) $250,080 C) $287,175 D) $287,250 A) $249,920 B) $250,080 C) $287,175 D) $287,250

On July 1, 2020, CANCO purchased inventory from its main U.S. supplier, RNB Enterprises, at a cost of US$12,000. CANCO's year end is on July 31. Payment of US$12,000 for the inventory is due on August 31, 2020. Some important dates regarding this transaction, as well as the exchange rates in effect at each of these dates are shown below: \[\begin{array} { | l | l | l } \hline \text { Trarsaction date: July } 1,2020 : & \text { 1 U.S. Dollar } = \text { CDN } \$ 1.370 \\ \hline\text { Year end July } 31,2020 : & \text { 1 U.S. Dollar } = \text { CDN } \$ 1.345 \\ \hline \text { Setternent date: August } 31,2020 : & \text { 1 U.S. Dollar } = \text { CDN } \$ 1.325 \\ \hline \end{array}\] At what amount would CANCO record its inventory purchase from RNB on July 1, 2020?

A) CDN$15,900 B) CDN$16,440 C) CDN$16,140 D) US$12,000 A) CDN$15,900 B) CDN$16,440 C) CDN$16,140 D) US$12,000

On January 1, 2020, Canadian Music International (CMI), a manufacturer of high-end recording equipment based in Toronto, shipped US$120,000 worth of inventory to its main U.S. distributor in Chicago, with full payment of these goods due by February 28, 2020. CMI has a January 31 year end. A list of significant dates and exchange rates is shown below. \[\begin{array} { | l | l | } \hline \text { Transaction Date: Jaruaary } 1,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.141 \\ \hline \text { Year-End Date: Jaruary } 31,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.142 \\ \hline \text { Setternent Date: February 28, 2020 } & \text { US } \$ 1 = \text { CDN } \$ 1.145 \\ \hline \end{array}\] The invoice price billed by CMI was US$120,000. What is the amount of CMI's foreign exchange gain or loss at year-end?

A) CDN$120 loss B) CDN$480 gain C) CDN$120 gain D) Nil; foreign exchange gains or losses are deferred to settlement A) CDN$120 loss B) CDN$480 gain C) CDN$120 gain D) Nil; foreign exchange gains or losses are deferred to settlement

On January 1, 2020, Canadian Music International (CMI), a manufacturer of high-end recording equipment based in Toronto, shipped US$120,000 worth of inventory to its main U.S. distributor in Chicago, with full payment of these goods due by February 28, 2020. CMI has a January 31 year end. A list of significant dates and exchange rates is shown below. \[\begin{array} { | l | l | } \hline \text { Transaction Date: Jaruaary } 1,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.141 \\ \hline \text { Year-End Date: Jaruary } 31,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.142 \\ \hline \text { Setternent Date: February 28, 2020 } & \text { US } \$ 1 = \text { CDN } \$ 1.145 \\ \hline \end{array}\] The invoice price billed by CMI was US$120,000. What is the total amount of CMI's foreign exchange gain or loss on this transaction?

A) CDN$360 loss B) CDN$120 gain C) CDN$360 gain D) CDN$480 gain A) CDN$360 loss B) CDN$120 gain C) CDN$360 gain D) CDN$480 gain

On January 1, 2017, GRL Inc. purchased, in U.S. Funds $500,000 of Bonds of the OBY Company. On that date, the Bonds were trading at par. These Bonds pay 10% interest annually each December 31. The Bonds mature on December 31, 2019. The following exchange rates were applicable between 2017 and 2019. The rates indicate the cost (in Canadian dollars) of purchasing 1 U.S. dollar: $\begin{array}{|l|l|} \hline \text { January } 1,2017 & \text { CDN \$1.4565 } \\ \hline \text { Average rate for } 2017 & \text { CDN } \$ 1.4570 \\ \hline \text { December } 31,2017 & \text { CDN } \$ 1.4725 \\ \hline \text { Average rate for } 2018 & \text { CDN } \$ 1.4600\\\hline \text { December } 31,2018 & \text { CDN } \$ 1.4425 \\ \hline \text { Average rate for } 2019 & \text { CDN } \$ 1.4500 \\ \hline \text { December } 31,2019 & \text { CDN } \$ 1.4575 \\\hline \end{array}$ Prepare GRL's journal entries for each of 2017, 2018 and 2019.

The answer of On January 1, 2017, GRL Inc. purchased,...

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: \[\begin{array} { | l | c | } \hline \text { Jaruary } 1,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1500 \\ \hline \text { December } 31,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1490 \\ \hline \text { December } 31,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.1485 \\ \hline \text { December } 31,2021 & \text { US } \$ 1 = \text { CDN } \$ 1.1483 \\ \hline \text { December } 31,2022 & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\ \hline \end{array}\] The average rates in effect for 2019 and 2020 were as follows: \[\begin{array} { | l | l | } \hline 2019 : & \text { US } \$ 1 = \text { CDN } \$ 1.1493 \\ \hline 2020 : & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\ \hline \end{array}\] What is the amount of interest paid (in Canadian Dollars) during 2019?

A) $250,000 B) $287,250 C) $287,325 D) $372,500 A) $250,000 B) $287,250 C) $287,325 D) $372,500

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: \[\begin{array} { | l | l | } \hline \text { Jaruary } 1,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1500 \\ \hline \text { December } 31,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1490 \\ \hline \text { December } 31,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.1485 \\ \hline \text { December } 31,2021 & \text { US } \$ 1 = \text { CDN } \$ 1.1483 \\ \hline \text { December } 31,2022 & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\ \hline \end{array}\] The average rates in effect for 2019 and 2020 were as follows: \[\begin{array} { | l | c |} \hline 2019 : & \text { US } \$ 1 = \text { CDN } \$ 1.1493 \\ \hline 2020 : & \text { US } \$ 1 = \operatorname { CDN } \$ 1.1487 \\ \hline \end{array}\] By what amount (in Canadian Dollars) would XYZ have to adjust its Loan Liability on December 31, 2020 as a result of the year's foreign exchange rate fluctuations?

A) $3,500 decrease B) $2,500 decrease C) $2,500 increase D) Nil A) $3,500 decrease B) $2,500 decrease C) $2,500 increase D) Nil

Exam 10: Foreign Currency Transactions

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: Jaruary 1,2019 US \ 1= CDN \ 1.1500 Decernber 31,2019 US \ 1= CDN \ 1.1490 December 31,2020 US \ 1= CDN \ 1.1485 December 31,2021 US \ 1= CDN \ 1.1483 December 31,2022 US \ 1= CDN \ 1.1487 The average rates in effect for 2019 and 2020 were as follows: 2019: US \ 1= CDN \ 1.1493 2020: US \ 1= CDN \ 1.1487 What is the amount of foreign exchange gain or loss recognized on the 2020 Income Statement as a result of revaluing the loan payable?

(Multiple Choice)

4.7/5

(38)

Question 21

RXN's year-end is on December 31. On November 1, 2019 when the U.S. dollar was worth CDN$1.365, RXN sold merchandise to an American client for US$300,000. Full payment of this invoice was expected by March 1, 2020. On December 1, the spot rate was CDN$1.3450, and the three-month forward rate was CDN$1.3250. In order to minimize its Foreign Exchange risk and exposure, RXN entered into a forward contract with its bank on December 1, 2019 to deliver US$300,000 in three months' time. The spot rate at year-end was CDN$1.36 and the forward rate from December 31, 2019 to March 1, 2020 was CDN$1.34. On March 1, 2020, RXN received the US$300,000 from its client and settled its contract with the bank. The forward contract was to be accounted for as a fair value hedge of the US dollar receivable. Significant dates and exchange rates pertaining to this transaction are as follows: Spot\nobreakspaceRates Forward\nobreakspaceRates November 1, 2019 (Transaction date) \ 1=\ 1.365 December 1,2019 (Hedged date) US \ 1= CDN \ 1.3450 US \1 =CDN \1 .3250 December 31,2019 (Year-end) CDN \ 1.36 CDN \ 1.34 March 1, 2020 (Settlement date) \ 1= CDN \ 1.368 US \1 =CDN \1 .368. *for contracts expiring on March 1, 2020 What is the amount of RXN's foreign exchange gain or loss prior to its hedge?

(Multiple Choice)

4.9/5

(30)

Question 22

ABC Inc. sells thermal compressors throughout the world. On January 1, 2019, the company sold 500 compressors to an American supplier at a total cost US$60,000 when the spot rate was US$1 = CDN$1.3750. Payment on the invoice was due by May 1, 2019. ABC entered into a 4-month hedge with its bank at a forward rate of CDN$1.40 on January 2, 2019. The forward contract was declared to be a fair value hedge of the fair value of the receivable from the American customer. ABC's year-end is on January 31, and on that date in 2019, the spot rate in effect was CDN$1.3825 and the forward rate to May 1, 2019 was CDN$1.3950. ABC received payment from its supplier on May 1, 2019 when the spot rate was US$1 = CDN$1.3975. A summary of the significant dates and exchange rates pertaining to this transaction are as follows: Spot Rates Forward Rates january 1, 2019 \ 1=\ 1.3750 \ldots-\@cdots January 2, 2019 (Forward contract date) US \ 1= CDN \ 1.3750 US \ 1= CDN \ 1.40 january 31,2019 (Year-end) CDN \ 1.3825 CDN \ 1.3950 May 1, 2019 (Settlement date) US \1 =CDN \1 .3975 US \1 = CDN \1 .3975 *for contracts expiring on May 1, 2019 What is the required adjustment to ABC's accounts receivable at year-end as a result of this transaction?

(Multiple Choice)

4.9/5

(43)

Question 23

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: Jaruary 1,2019 US \ 1= CDN \ 1.1500 December 31,2019 US \ 1= CDN \ 1.1490 December 31,2020 US \ 1= CDN \ 1.1485 December 31,2021 US \ 1= CDN \ 1.1483 December 31,2022 US \ 1= CDN \ 1.1487 The average rates in effect for 2019 and 2020 were as follows: 2019: US \ 1= CDN \ 1.1493 2020: US \ 1= CDN \ 1.1487 What is the amount of the foreign exchange gain or loss recognized on the 2019 Income Statement as a result of revaluing the loan payable?

(Multiple Choice)

4.9/5

(30)

Question 24

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: Jaruary 1,2019 US \ 1= CDN \ 1.1500 December 31,2019 US \ 1= CDN \ 1.1490 Decernber 31,2020 US \ 1= CDN \ 1.1485 Decerrber 31,2021 US \ 1= CDN \ 1.1483 Decermber 31,2022 US \ 1= CDN \ 1.1487 The average rates in effect for 2019 and 2020 were as follows: 2019: US \ 1= CDN \ 1.1493 2020: US \ 1= CDN \ 1.1487 What is the amount of interest expense (in Canadian Dollars) recorded for 2020?

(Multiple Choice)

4.7/5

(36)

Question 25

On July 1, 2020, CANCO purchased inventory from its main U.S. supplier, RNB Enterprises, at a cost of US$12,000. CANCO's year end is on July 31. Payment of US$12,000 for the inventory is due on August 31, 2020. Some important dates regarding this transaction, as well as the exchange rates in effect at each of these dates are shown below: Trarsaction date: July 1,2020: 1 U.S. Dollar = CDN \ 1.370 Year end July 31,2020: 1 U.S. Dollar = CDN \ 1.345 Setternent date: August 31,2020: 1 U.S. Dollar = CDN \ 1.325 At what amount would CANCO record its inventory purchase from RNB on July 1, 2020?

(Multiple Choice)

4.7/5

(39)

Question 26

On January 1, 2020, Canadian Music International (CMI), a manufacturer of high-end recording equipment based in Toronto, shipped US$120,000 worth of inventory to its main U.S. distributor in Chicago, with full payment of these goods due by February 28, 2020. CMI has a January 31 year end. A list of significant dates and exchange rates is shown below. Transaction Date: Jaruaary 1,2020 US \ 1= CDN \ 1.141 Year-End Date: Jaruary 31,2020 US \ 1= CDN \ 1.142 Setternent Date: February 28, 2020 US \ 1= CDN \ 1.145 The invoice price billed by CMI was US$120,000. What is the amount of CMI's foreign exchange gain or loss at year-end?

(Multiple Choice)

4.8/5

(33)

Question 27

On January 1, 2020, Canadian Music International (CMI), a manufacturer of high-end recording equipment based in Toronto, shipped US$120,000 worth of inventory to its main U.S. distributor in Chicago, with full payment of these goods due by February 28, 2020. CMI has a January 31 year end. A list of significant dates and exchange rates is shown below. Transaction Date: Jaruaary 1,2020 US \ 1= CDN \ 1.141 Year-End Date: Jaruary 31,2020 US \ 1= CDN \ 1.142 Setternent Date: February 28, 2020 US \ 1= CDN \ 1.145 The invoice price billed by CMI was US$120,000. What is the total amount of CMI's foreign exchange gain or loss on this transaction?

(Multiple Choice)

4.9/5

(38)

Question 28

On January 1, 2017, GRL Inc. purchased, in U.S. Funds $500,000 of Bonds of the OBY Company. On that date, the Bonds were trading at par. These Bonds pay 10% interest annually each December 31. The Bonds mature on December 31, 2019. The following exchange rates were applicable between 2017 and 2019. The rates indicate the cost (in Canadian dollars) of purchasing 1 U.S. dollar: January 1,2017 CDN \1 .4565 Average rate for 2017 CDN \ 1.4570 December 31,2017 CDN \ 1.4725 Average rate for 2018 CDN \ 1.4600 December 31,2018 CDN \ 1.4425 Average rate for 2019 CDN \ 1.4500 December 31,2019 CDN \ 1.4575 Prepare GRL's journal entries for each of 2017, 2018 and 2019.

(Essay)

4.9/5

(47)

Question 29

Maplehauff Inc. sells lumber to a number of clients around the world. On December 1, 2019 the company shipped some lumber to a client in the U.S. The selling price was established at US$600,000 with payment to be received on March 1, 2020. On December 3, 2019 the company entered into a hedge with a Canadian Bank at the 90 day forward rate of US$1 = CDN$1.275. The forward contract was designated as a cash flow hedge of the amount due from the American customer. Maplehauff uses the net method to record the forward contract. Maplehauff Inc. received the payment from its American client on March 1, 2020. The company's year-end is on December 31. The two-month forward rate for US dollars was CDN$1.255 on that date. Selected spot rates were as follows: December 1,2019: US \ 1= CDN \ 1.2355 December 3,2019: US \ 1= CDN \ 1.2355 December 31,2019 US \ 1=\ 1.2455 March 1,2020: \ 1=\ 1.2480 Prepare any and all journal entries arising from this transaction.

(Essay)

4.8/5

(35)

Question 30

Prairie Dog Inc. borrowed US$10,000,000 on January 1, 2017 at an annual rate of 8%. The loan is due December 31, 2020 and interest is payable annually each December 31. The exchange rates on selected dates throughout the life of the loan are shown below: January 1,2017 CDN \ 1.4415 December 31,2017 CDN \ 1.4325 December 31,2018 CDN \ 1.4575 December 31,2019 CDN \ 1.4435 December 31,2020 CDN \ 1.4525 Assume that the average annual exchange rate was equal to the December 31^st spot rates. Prepare the journal entries for 2017.

(Essay)

4.8/5

(36)

Question 31

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: Jaruary 1,2019 US \ 1= CDN \ 1.1500 December 31,2019 US \ 1= CDN \ 1.1490 December 31,2020 US \ 1= CDN \ 1.1485 December 31,2021 US \ 1= CDN \ 1.1483 December 31,2022 US \ 1= CDN \ 1.1487 The average rates in effect for 2019 and 2020 were as follows: 2019: US \ 1= CDN \ 1.1493 2020: US \ 1= CDN \ 1.1487 What is the amount of interest paid (in Canadian Dollars) during 2019?

(Multiple Choice)

4.7/5

(34)

Question 32

Which of the following statements accurately describes the manner in which transactions must be translated under IAS 21 The Effects of Changes in Foreign Exchange Rates?

(Multiple Choice)

4.9/5

(30)

Question 33

RXN's year-end is on December 31. On November 1, 2019 when the U.S. dollar was worth CDN$1.365, RXN sold merchandise to an American client for US$300,000. Full payment of this invoice was expected by March 1, 2020. On December 1, the spot rate was CDN$1.3450, and the three-month forward rate was CDN$1.3250. In order to minimize its Foreign Exchange risk and exposure, RXN entered into a forward contract with its bank on December 1, 2019 to deliver US$300,000 in three months' time. The spot rate at year-end was CDN$1.36 and the forward rate from December 31, 2019 to March 1, 2020 was CDN$1.34. On March 1, 2020, RXN received the US$300,000 from its client and settled its contract with the bank. The forward contract was to be accounted for as a fair value hedge of the US dollar receivable. Significant dates and exchange rates pertaining to this transaction are as follows: Spot\nobreakspaceRates Forward\nobreakspaceRates November 1, 2019 (Transaction date) \ 1=\ 1.365 December 1,2019 (Hedged date) US \ 1= CDN \ 1.3450 US \1 =CDN \1 .3250 December 31,2019 (Year-end) CDN \ 1.36 CDN \ 1.34 March 1, 2020 (Settlement date) \ 1= CDN \ 1.368 US \1 =CDN \1 .368. *for contracts expiring on March 1, 2020 How much (in Canadian Dollars) will RXN expect to receive from the bank when its forward contract is settled?

(Multiple Choice)

4.7/5

(45)

Question 34

Which of the following provides the best hedge against exchange variations in the value of a stream of income in a foreign currency where the payments are expected to occur in equal amounts over a period of five years?

(Multiple Choice)

4.9/5

(39)

Question 35

On July 1, 2019, North Inc., based in Alberta, ordered merchandise from an American supplier for US$600,000. Delivery was scheduled for the month of October, with payment to be made in full on November 15, 2019. Once the order was placed, North entered into a forward contract with its bank to purchase US$600,000 on the settlement date at the forward rate of CDN$1.3625. The forward contract was designated as a cash flow hedge of the cash flow required to settle with the American supplier. The merchandise was received on October 1, 2019, when the spot rate was US$1 = CDN$1.3575. On October 31, the company's year-end, the spot rate was $1.3690. North purchased the U.S. dollars to pay its supplier on November 15, 2019 when the spot rate was CDN$1.3725. The forward rate to November 15, 2019, was CDN$1.365 on October 1 and CDN$1.37 on October 31. A summary of the significant dates and exchange rates pertaining to this transaction are as follows: Spot Rates Forward Rates July 1,2019 (Order date and hedge date) \ 1=\ 1.3445 \ 1=\ 1.3625 October 1,2019 (Delivery date) \ 1=\ 1.3575 \ 1=\ 1.365 October 31,2019(Year-end) CDN \1 .369 CDN \1 .37 November 15,2019 (Settlement date) US \1 =CDN \1 .3725 US \1 =CDN \1 .3725 *for contracts expiring on November 15, 2019 What is the amount of the liability to the bank recorded on the commitment date if the forward contract is recorded using the gross method?

(Multiple Choice)

4.8/5

(35)

Question 36

On July 1, 2019, North Inc., based in Alberta, ordered merchandise from an American supplier for US$600,000. Delivery was scheduled for the month of October, with payment to be made in full on November 15, 2019. Once the order was placed, North entered into a forward contract with its bank to purchase US$600,000 on the settlement date at the forward rate of CDN$1.3625. The forward contract was designated as a cash flow hedge of the cash flow required to settle with the American supplier. The merchandise was received on October 1, 2019, when the spot rate was US$1 = CDN$1.3575. On October 31, the company's year-end, the spot rate was $1.3690. North purchased the U.S. dollars to pay its supplier on November 15, 2019 when the spot rate was CDN$1.3725. The forward rate to November 15, 2019, was CDN$1.365 on October 1 and CDN$1.37 on October 31. A summary of the significant dates and exchange rates pertaining to this transaction are as follows: Spot Rates Forward Rates July 1,2019 (Order date and hedge date) \ 1=\ 1.3445 \ 1=\ 1.3625 October 1,2019 (Delivery date) \ 1=\ 1.3575 \ 1=\ 1.365 October 31,2019(Year-end) CDN \1 .369 CDN \1 .37 November 15,2019 (Settlement date) US \1 =CDN \1 .3725 US \1 =CDN \1 .3725 *for contracts expiring on November 15, 2019 What amount will be recorded as the value of the forward contract on the commitment date if the forward contract is recorded using the net method?

(Multiple Choice)

4.9/5

(46)

Question 37

In which of the following situations is a gain or loss recorded on a commitment asset or liability which would not otherwise be recorded?

(Multiple Choice)

4.9/5

(36)

Question 38

Which of the following statements is NOT correct?

(Multiple Choice)

4.9/5

(33)

Question 39

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk. The following exchange rates were in effect throughout the term of the loan: Jaruary 1,2019 US \ 1= CDN \ 1.1500 December 31,2019 US \ 1= CDN \ 1.1490 December 31,2020 US \ 1= CDN \ 1.1485 December 31,2021 US \ 1= CDN \ 1.1483 December 31,2022 US \ 1= CDN \ 1.1487 The average rates in effect for 2019 and 2020 were as follows: 2019: US \ 1= CDN \ 1.1493 2020: US \ 1= CDN \ 1.1487 By what amount (in Canadian Dollars) would XYZ have to adjust its Loan Liability on December 31, 2020 as a result of the year's foreign exchange rate fluctuations?

(Multiple Choice)

4.7/5

(40)

Question 40

Which of the following statements accurately describes the manner in which transactions must be translated under IAS 21 The Effects of Changes in Foreign Exchange Rates?

Which of the following provides the best hedge against exchange variations in the value of a stream of income in a foreign currency where the payments are expected to occur in equal amounts over a period of five years?

In which of the following situations is a gain or loss recorded on a commitment asset or liability which would not otherwise be recorded?

Which of the following statements is NOT correct?

Conceptual and Case Analysis Frameworks for Financial Reporting

Investments in Equity Securities

Business Combinations

Consolidation of Non-Wholly Owned Subsidiaries

Consolidation Subsequent to Acquisition Date

Intercompany Inventory and Land Profits

A Intercompany Profits in Depreciable Assets B Intercompany Bondholdings

Consolidated Cash Flows and Changes in Ownership

Other Consolidation Reporting Issues

Translation and Consolidation of Foreign Operations

Accounting for Not-For-Profit and Public Sector Organizations

Filters