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Required Prepare Maple Ltd.'s journal entries to reflect the above assuming that: a. the hedge is a cash flow hedge, and b. the hedge is a fair value hedge.

Required Prepare Maple Ltd.'s journal entries to reflect the above assuming that: a. the hedge is a cash flow hedge, and b. the hedge is a fair value hedge.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On August 31, 2020, Maple Ltd., a Canadian company, entered into a contract to purchase goods from Leaf Ltd., a foreign corporation. The terms of the contract call for the goods to be delivered to Maple Ltd's Toronto location on May 31, 2021. The cost of goods is EUR $1,250,000 to be settled on June 30, 2021. On August 31, 2020, Maple Ltd. also arranged for a forward contract through its bank for EUR $1,250,000. The goods were delivered on time, and Maple Ltd. settled with Leaf Ltd. on June 30, 2021. Maple Ltd. has a April 30 year-end. The spot and forward rates are as follows: August 31, 2020 April 30, 2021 May 31, 2021 June 30, 2021 Spot Rate (SCAD) 1 USD = x.xx CAD $1.42 $1.44 $1.45 $1.50 Forward Rate (SCAD) 1 USD = X.XX CAD $1.46 $1.48 $1.49 $1.50 Required Prepare Maple Ltd.'s journal entries to reflect the above assuming that: a. the hedge is a cash flow hedge, and b. the hedge is a fair value hedge.
Transcribed Image Text:On August 31, 2020, Maple Ltd., a Canadian company, entered into a contract to purchase goods from Leaf Ltd., a foreign corporation. The terms of the contract call for the goods to be delivered to Maple Ltd's Toronto location on May 31, 2021. The cost of goods is EUR $1,250,000 to be settled on June 30, 2021. On August 31, 2020, Maple Ltd. also arranged for a forward contract through its bank for EUR $1,250,000. The goods were delivered on time, and Maple Ltd. settled with Leaf Ltd. on June 30, 2021. Maple Ltd. has a April 30 year-end. The spot and forward rates are as follows: August 31, 2020 April 30, 2021 May 31, 2021 June 30, 2021 Spot Rate (SCAD) 1 USD = x.xx CAD $1.42 $1.44 $1.45 $1.50 Forward Rate (SCAD) 1 USD = X.XX CAD $1.46 $1.48 $1.49 $1.50 Required Prepare Maple Ltd.'s journal entries to reflect the above assuming that: a. the hedge is a cash flow hedge, and b. the hedge is a fair value hedge.
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