Exam 10: Foreign Currency Transactions

Maplehauff Inc. sells lumber to a number of clients around the world. On December 1, 2015 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, 2016. On December 3, 2015 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 fair value hedge of the amount due from the American customer. Maplehauff Inc. received the payment from its American client on March 1, 2016. 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, 2015: US \ 1= CDN \ 1.2356 December 3,2015: US \ 1= CDN \ 1.2365 December 31,2015: US \ 1= CDN \ 1.2456 March 1, 2016: US \ 1= CDN \ 1.2480 -Prepare a partial Balance Sheet for Maplehauff Inc. on December 31, 2015 showing the Account Receivable from the American client as well as the accounts associated with the hedge.

At what amount would CDN record its inventory purchase from RNB at the time of purchase?

At the balance sheet date, monetary items denominated in a foreign currency should be adjusted to reflect the exchange rate in effect at the:

On July 1, 2016, Great White North (GWN) Inc. purchased merchandise from a supplier in the U.S. for US$800,000 with terms requiring full payment by October 31, 2016. On July 2, GWN entered into a forward contract to purchase US$800,000 on October 31, 2016 at a rate of CDN$1.2275. The forward contract was designated as a hedge of the fair value of the amount due to the supplier. On October 31, GWN paid its supplier in full. Selected dates and spot rates are shown below: July 1,2016 CDN \ 1.2150 July 31,2016 CDN \ 1.2175 October 31,2016 CDN \ 1.22 GWN has a July 31^st year end. On that date the forward rate for US dollars for three months was CDN $1.2225. -Prepare a July 31, 2016 Partial Trial Balance, indicating how each account balance would appear on the company's financial statements.

What is the amount of the forward contract in Canadian dollars?

What was the cost to CDN of the amount paid to RNB on the settlement date?

Assuming that the accounts receivable balance was not adjusted on December 1, 2017, what adjustment (if any) would be required to RXN's year-end accounts receivable balance?

Maplehauff Inc. sells lumber to a number of clients around the world. On December 1, 2015 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, 2016. On December 3, 2015 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 fair value hedge of the amount due from the American customer. Maplehauff Inc. received the payment from its American client on March 1, 2016. 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, 2015: US \ 1= CDN \ 1.2356 December 3,2015: US \ 1= CDN \ 1.2365 December 31,2015: US \ 1= CDN \ 1.2456 March 1, 2016: US \ 1= CDN \ 1.2480 -Prepare the journal entries to record the receipt of the US$600,000 on March 1, 2016, assuming that Maplehauff Inc did not enter into a hedge transaction in December 2015.

What is the amount of North's recognized exchange gain or loss arising from this transaction included in its financial statements as at October 31, 2017?

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

Canada Corp. sells raw lumber to a number of countries around the world. On December 1, 2016 the company shipped some lumber to a client in Japan. The selling price was established at 500,000 Yen with payment to be received on March 1, 2017. On December 3, 2016 the company entered into a hedge with a Canadian Bank at the 90 day forward rate of 1 Yen = CDN$1.185. The forward contract was designated as a fair value hedge of the receivable from the Japanese customer. Canada Corp received the payment from its Japanese client on March 1, 2017. Canada Corp's year end is on December 31. Selected spot rates were as follows: December 1, 2016: 1 Yen = CDN \1 .156 December 3, 2016: 1 Yen = CDN \1 .156 December 31, 2016: 1 Yen = CDN \ 1.1626 March 1, 2017: 1 Yen = CDN \ 1.1750 The two-month forward rate on December 31, 2016 was 1Yen = CDN$1.1800. -Prepare a partial Balance Sheet for Canada Corp on December 31, 2016 showing the account receivable from the Japanese client as well as the accounts associated with the hedge.

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?

At what amount would CDN record its liability to RNB at the time of purchase?

Prepare the December 31, 2016 Balance Sheet Presentation of the Receivable from the American client and the accounts associated with the hedge.

What is the required adjustment to ABC's accounts receivable at year-end as a result of this transaction?

By what amount (in Canadian Dollars) would XYZ have to adjust its Loan Liability on December 31, 2016 as a result of the year's foreign exchange rate fluctuations?

Which of the following statements is correct?

On July 1, 2016, Great White North (GWN) Inc. purchased merchandise from a supplier in the U.S. for US$800,000 with terms requiring full payment by October 31, 2016. On July 2, GWN entered into a forward contract to purchase US$800,000 on October 31, 2016 at a rate of CDN$1.2275. The forward contract was designated as a hedge of the fair value of the amount due to the supplier. On October 31, GWN paid its supplier in full. Selected dates and spot rates are shown below: July 1,2016 CDN \ 1.2150 July 31,2016 CDN \ 1.2175 October 31,2016 CDN \ 1.22 GWN has a July 31^st year end. On that date the forward rate for US dollars for three months was CDN $1.2225. -Prepare the journal entries assuming that no forward contract was entered into.

Atwhat amount (in Canadian Dollars) would RXN's sale be recorded initially?

By what amount (in Canadian Dollars) would XYZ have to adjust its Loan Liability on December 31, 2017 as a result of the year's foreign exchange rate fluctuations?