2011 week 10 FOREIGN CURRENCY TRANSACTIONS

# The relevant exchange rates are as follows april 30

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Unformatted text preview: 30th year-end. The relevant exchange rates are as follows: April 30, 20x8 June 30, 20x8 July 31, 20x8 \$US 1.00 = \$C1.47 \$US 1.00 = \$C1.45 \$US 1.00 = \$C1.51 Required: Prepare the journal entries to account for the above transactions. © CMA Ontario, 2011 16 of 20 CMA Accelerated Program - 2011/2012 Lecture Student Weekly File - Week 10 Problem 16 – Foreign Currency Transactions On August 1, 20x4, Zip Ltd. Purchased some merchandise from a company in Switzerland for SF450,000. The liability was not due until March 1, 20x5. Zip was quite confident that the exchange rate fluctuations were not a problem and took no action to hedge the liability. On November 1, 20x4, Zip looked at the exchange rates and decided that they had better offset the liability with a 120-day forward contract. Assume a December 31 year end and that all months have 30 days. EXCHANGE RATES August 1, 20x4 November 1, 20x4 November l, 20x4 December 31, 20x4 December 31, 20x4 Aug 1 – Dec 31, 20x4 March 1, 20x5 December 31, 20x5 March 1, 20x6 spot rate spot rate 120-day forward rate spot rate 60-day forward rate average rate spot rate spot rate spot rate C\$1 = SF2.5 C\$1 = SF2.1 C\$1 = SF1.9 C\$1 = SF1.7 C\$1 = SF1.6 C\$1 = SF2.0 C\$1 = SF2.7 C\$1 = SF2.9 C\$1 = SF2.4 Required: 1. Prepare all the journal entries for the years 20x4 and 20x5 for Zip for this transaction. 2. Assume that the liability was a note due on March 1, 20x6 (instead of 20x5, as given above), and that Zip does not offset with a forward contract. Prepare all the journal entries for the year 20x4. Assume that the interest in the note is 10%. © CMA Ontario, 2011 17 of 20 CMA Accelerated Program - 2011/2012 Lecture Student Weekly File - Week 10 Problem 19 – Foreign Currency Translation Cancorp Ltd. purchased 90% of the shares of Forsub Inc. on January 1, 20x1. Forsub is located in the country of Amandaland. The financial statements of Forsub as at December 31, 20x2 are as follows: Forsub Statement of Financial Position as at December 31, 20x2 CORBINS Cash Accounts receivable Inventory Fixed Assets Accumulated depreciation 150,000 175,000 650,000 1,480,000 (520,000) 1,935,000 Current liabilities Long-term liabilities, 8% Common shares Retained earnings, January 1, 20x2 Net income - 20x2 Dividends (declared and paid on December 31, 20x2) 125,000 300,000 100,000 1,350,000 100,000 (40,000) 1,935,000 Forsub Income Statement for the year ended December 31, 20x2 Sales Cost of goods sold Depreciation Interest expense Other Gain o...
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## This note was uploaded on 01/07/2014 for the course ACCOUNTING 346 taught by Professor William during the Fall '12 term at DeVry Chicago.

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