Question 1

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?

Accepted Answer

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

Question 2

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:
$\begin{array}{|l|r|r|}
\hline&Spot~ Rates &Forward ~Rates\
\hline \text { November 1, } 2019 \text { (Transaction date) } &\mathrm{US} \$ 1=\mathrm{CDN} \$ 1.365\
\hline \text { December } 1,2019 \text { (Hedged date) } & \text { US } \$ 1=\text { CDN } \$ 1.3450 & \text { US\$1=CDN\$1.3250 } \
\hline \text { December 31,2019 (Year-end) } & \text { CDN } \$ 1.36 & \text { CDN } \$ 1.34 \
\hline \text { March 1, 2020 (Settlement date) } & \mathrm{US} \$ 1=\text { CDN } \$ 1.368 & \text { US\$1 =CDN\$1.368. }\
\hline
\end{array}$ *for contracts expiring on March 1, 2020
What is the amount of RXN's foreign exchange gain or loss prior to its hedge?

Accepted Answer

A)  A CDN$6,000 loss. 
B)  A CDN$6,000 gain. 
C)  A CDN$4,500 gain. 
D)  Nil

Question 3

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:
$\begin{array}{|l|r|r|}
\hline & \text { Spot Rates } & \text { Forward Rates } \
\hline \text { january 1, } 2019 & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3750 & \ldots-\cdots \
\hline\begin{array}{l}
\text { January 2, } 2019 \text { (Forward contract } \
\text { date) }
\end{array} & \text { US } \$ 1=\text { CDN } \$ 1.3750 & \text { US } \$ 1=\text { CDN } \$ 1.40 \
\hline \text { january 31,2019 (Year-end) } & \text { CDN } \$ 1.3825 & \text { CDN } \$ 1.3950 \
\hline \text { May 1, 2019 (Settlement date) } & \text { US\$1 =CDN\$1.3975 } & \text { US\$1 = CDN\$1.3975 }\
\hline
\end{array}$ *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?

Accepted Answer

A)  CDN$450 decrease 
B)  CDN$900 increase 
C)  CDN$450 increase 
D)  Nil

Question 4

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?

Accepted Answer

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

Question 5

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?

Accepted Answer

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

Question 6

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?

Accepted Answer

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

Question 7

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?

Accepted Answer

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

Question 8

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?

Accepted Answer

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

Question 9

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.

Accepted Answer

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

Question 10

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:
 $\begin{array}{|l|l|}
\hline \text { December } 1,2019: & \text { US } \$ 1=\text { CDN } \$ 1.2355 \
\hline \text { December } 3,2019: & \text { US } \$ 1=\text { CDN } \$ 1.2355 \
\hline \text { December } 31,2019 & \text { US } \$ 1=\mathrm{CDN} \$ 1.2455 \
\hline \text { March } 1,2020: & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.2480\\hline
\end{array}$ Prepare any and all journal entries arising from this transaction.

Accepted Answer

The answer of Maplehauff Inc. sells lumber to a number...

Question 11

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: $\begin{array}{|l|l|} \hline \text { January } 1,2017 & \text { CDN } \$ 1.4415 \ \hline \text { December } 31,2017 & \text { CDN } \$ 1.4325 \ \hline \text { December } 31,2018 & \text { CDN } \$ 1.4575 \ \hline \text { December } 31,2019 & \text { CDN } \$ 1.4435 \ \hline \text { December } 31,2020 & \text { CDN } \$ 1.4525 \ \hline \end{array}$ Assume that the average annual exchange rate was equal to the December 31^st spot rates. Prepare the journal entries for 2017.

Accepted Answer

The answer of Prairie Dog Inc. borrowed US$10,000,000 on January...

Question 12

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?

Accepted Answer

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

Question 13

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?

Accepted Answer

A)  All individual transactions must be translated into the functional currency of the reporting entity. 
B)  All individual transactions must be converted into the local currency of the reporting entity. 
C)  All individual transactions are to be reported into the currency of the jurisdiction where the majority of shareholders reside. 
D)  All individual transactions may be reported into the currency of the country where the corporation does the majority of its business.

Question 14

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:
$\begin{array}{|l|r|r|}
\hline&Spot~ Rates &Forward ~Rates\
\hline \text { November 1, } 2019 \text { (Transaction date) } &\mathrm{US} \$ 1=\mathrm{CDN} \$ 1.365\
\hline \text { December } 1,2019 \text { (Hedged date) } & \text { US } \$ 1=\text { CDN } \$ 1.3450 & \text { US\$1=CDN\$1.3250 } \
\hline \text { December 31,2019 (Year-end) } & \text { CDN } \$ 1.36 & \text { CDN } \$ 1.34 \
\hline \text { March 1, 2020 (Settlement date) } & \mathrm{US} \$ 1=\text { CDN } \$ 1.368 & \text { US\$1 =CDN\$1.368. }\
\hline
\end{array}$ *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?

Accepted Answer

A)  $397,500 
B)  $403,500 
C)  $402,000 
D)  $409,500

Question 15

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?

Accepted Answer

A)  Borrowing in the foreign currency with repayment due at the end of the five years. 
B)  Borrowing in Canadian dollars with repayment due at the end of the five years. 
C)  Borrowing in the foreign currency with annual repayments equal to the expected annual revenue cash flows. 
D)  Borrowing in Canadian dollars with annual repayments equal to the expected annual revenue cash flows.

Question 16

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:
$\begin{array}{|l|r|r|} 
\hline& \text { Spot Rates } & \text { Forward Rates } \
\hline \begin{array}{l}
\text { July } 1,2019 \text { (Order date and } \
\text { hedge date) }
\end{array} & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3445 & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3625 \
\hline \text { October } 1,2019 \text { (Delivery date) } & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3575 & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.365 \
\hline \text { October 31,2019(Year-end) } & \text { CDN\$1.369 } & \text { CDN\$1.37 } \
\hline \begin{array}{l}
\text { November } 15,2019 \text { (Settlement } \
\text { date) }
\end{array} & \text { US\$1=CDN\$1.3725 } & \text { US\$1=CDN\$1.3725 }\
\hline
\end{array}$ *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?

Accepted Answer

A)  $806,700 
B)  $817,500 
C)  $819,000 
D)  NIL

Question 17

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:
$\begin{array}{|l|r|r|} 
\hline& \text { Spot Rates } & \text { Forward Rates } \
\hline \begin{array}{l}
\text { July } 1,2019 \text { (Order date and } \
\text { hedge date) }
\end{array} & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3445 & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3625 \
\hline \text { October } 1,2019 \text { (Delivery date) } & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.3575 & \mathrm{US} \$ 1=\mathrm{CDN} \$ 1.365 \
\hline \text { October 31,2019(Year-end) } & \text { CDN\$1.369 } & \text { CDN\$1.37 } \
\hline \begin{array}{l}
\text { November } 15,2019 \text { (Settlement } \
\text { date) }
\end{array} & \text { US\$1=CDN\$1.3725 } & \text { US\$1=CDN\$1.3725 }\
\hline
\end{array}$ *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?

Accepted Answer

A)  $806,700 
B)  $817,500 
C)  $819,000 
D)  NIL

Question 18

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

Accepted Answer

A)  A speculative forward contract. 
B)  A fair value hedge of a firm commitment. 
C)  A fair value hedge of a recognized monetary item. 
D)  A cash flow hedge of a forecasted transaction.

Question 19

Which of the following statements is NOT correct?

Accepted Answer

A)  In a fair value hedge, the entity uses a hedging instrument to hedge against the fluctuation in the fair value of the hedged item. This method will be used when the hedged item will be valued at fair value. 
B)  In a cash flow hedge, the entity uses a hedging instrument to hedge against the fluctuation in the Canadian dollar value of future cash flows. 
C)  The gain or loss on the hedging instrument in a cash flow hedge is initially reported in other comprehensive income and reclassified to profit and loss when the hedged item affects profit. 
D)  The gain or loss on the hedging instrument in a fair value hedge is initially recognized in other comprehensive income and transferred to profit and loss when the hedged item has been revalued for accounting purposes in accordance with IFRS.

Question 20

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?

Accepted Answer

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

Exam 10: Foreign Currency Transactions

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?