4 On August 31, 2020, Maple Ltd., a Canadian company, entered into a contract to purchase goodsfrom Leaf Ltd., a foreign corporation. The terms of the contract call for the goods to be deliveredto Maple Ltd's Toronto location on May 31, 2021. The cost of goods is EUR $1,250,000 to besettled 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, 2020April 30, 2021May 31, 2021June 30, 2021Spot Rate (SCAD)1 USD = x.xx CAD$1.42$1.44$1.45$1.50Forward Rate (SCAD)1 USD = X.XX CAD$1.46$1.48$1.49$1.50RequiredPrepare Maple Ltd.'s journal entries to reflect the above assuming that:a. the hedge is a cash flow hedge, andb. the hedge is a fair value hedge.

a. Cash Flow HedgeDateAccountDebit (CAD)Credit (CAD)Aug 31, 2020Derivative Asset/Liability00Apr 30,…

Answered: Required Prepare Maple Ltd.'s journal…

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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On September 30, 2020, Chicken Ltd., a Canadian company, entered into a contract to purchase goodsfrom Wing Ltd., a foreign corporation. The terms of the contract call for the goods to be delivered toChicken Ltd.'s Edmonton location on May 30, 2021. The cost of goods is EUR $1,000,000 to be settled onJuly 31, 2021. On September 30, 2020, Chicken Ltd. also arranged for a forward contract through its bank for EUR$1,000,000. The goods were delivered on time, and Chicken Ltd, settled with Wing Ltd. on July 31, 2021.Chicken Ltd. has a April 30 year-end.The spot and forward rates are as follows: Spot Rate ($CAD)1 USD = x.xX CAD Forward Rate($CAD)1 USD = XXX CAD September 30, 2020 $1.42 $1.46 April 30, 2021 $1.44 $1.48 May 30, 2021 $1.45 $1.49 July 31, 2021 $1.50 $1.50 RequiredPrepare Chicken Ltd.'s journal entries to reflect the above assuming that:a. the hedge is a cash flow hedge, andb. the hedge is a fair value hedge.
On October 15, 2020, Buy Co., a Canadian company, entered into a contract to purchase goods from Sell Ltd., a foreign corporation. The contract terms called for the goods to be delivered to Buy Co.'s Calgary location on June 30, 2021. The cost of goods is USD $600,000 to be settled on July 31, 2021. On October 15, 2020, Buy Co. also arranged for a forward contract through its bank for USD $600,000. The goods were delivered on time, and Buy Co. settled with Sell Ltd. on July 31, 2021. Buy Co. has a May 31 year-end. The spot and forward rates are as follows: Spot Rate ($CAD): 1 USD = x.xx CAD Forward Rate ($CAD): 1 USD = x.xx CAD October 15, $1.42 $1.46 2020 May 31, 2021 $1.44 $1.48 June 30, $1.45 $1.49 2021 July 31, 2021 $1.50 $1.50 Required Prepare Buy Co.'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.
cebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 12,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 12,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.00 $ 3.075 December 31, 2020 3.10 3.200 March 1, 2021 3.25 N/A a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. Record the purchase of materials. 2 Record the forward contract. 3 Record the entry to revalue the foreign currency account payable. 4 Record the change in…
cebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 29,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 29,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 4.70 $ 4.775 December 31, 2020 4.80 4.900 March 1, 2021 4.95 N/A a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. a-2. What is the impact on 2020 net income? a-3. What is the impact on 2021 net income? a-4. What is the impact on net income over the two accounting periods?…
cebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 29,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 29,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 4.70 $ 4.775 December 31, 2020 4.80 4.900 March 1, 2021 4.95 N/A b-1. Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. b-2. What is the impact on net income in 2020 and in 2021? b-3. What is the impact on net income over the two accounting periods?
cebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 18,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 18,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.60 $ 3.675 December 31, 2020 3.70 3.800 March 1, 2021 3.85 N/A a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. a-2. What is the impact on 2020 net income? a-3. What is the impact on 2021 net income? a-4. What is the impact on net income over the two accounting periods?…
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 16,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 16,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $2.70 $2.775 December 31, 2020 2.80 2.900 March 1, 2021 2.95 N/A Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. Record the purchase of materials. Record the forward contract. Record the entry to revalue the foreign currency account payable. Record the change in the fair value of the forward contract. Record the…
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 16,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 16,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $2.70 $2.775 December 31, 2020 2.80 2.900 March 1, 2021 2.95 N/A A. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars.
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 19,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 19,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.70 $ 3.775 December 31, 2020 3.80 3.900 March 1, 2021 3.95 N/A b-1. Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. Record the purchase of materials. Record the forward contract. Record the entry to revalue the foreign currency account payable. Record the foreign exchange…
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 19,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 19,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.70 $ 3.775 December 31, 2020 3.80 3.900 March 1, 2021 3.95 N/A a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. Record the purchase of materials. Record the forward contract. Record the entry to revalue the foreign currency account payable. Record the change in the fair…
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 18,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 18,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.60 $ 3.675 December 31, 2020 3.70 3.800 March 1, 2021 3.85 N/A a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. a-2. What is the impact on 2020 net income? a-3. What is the impact on 2021 net income? a-4. What is the impact on net income over the two accounting periods?…
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 18,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 18,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date Spot Rate Forward Rate(to March 1, 2021) December 1, 2020 $ 3.60 $ 3.675 December 31, 2020 3.70 3.800 March 1, 2021 3.85 N/A a-1. Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U.S. dollars. a-2. What is the impact on 2020 net income? a-3. What is the impact on 2021 net income? a-4. What is the impact on net income over the two accounting periods?…