57 Compute the carrying value of the investment at the end of each year Prairie

57 compute the carrying value of the investment at

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57. Compute the carrying value of the investment at the end of each year:
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Prairie Dog Inc. borrowed US$10,000,000 on January 1, 2014 at an annual rate of 8%. The loan is due December 31, 2017 and interest is payable annually each December 31. The exchange rates on selected dates throughout the life of the loan are shown below: January 1, 2014 CDN $1.4415 December 31, 2014 CDN $1.4325 December 31, 2015 CDN $1.4575 December 31, 2016 CDN $1.4435 December 31, 2017 CDN $1.4525 Assume that the average annual exchange rate was equal to the December 31 st spot rates. 58. Prepare the journal entries for 2014.
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59. Calculate the exchange gains or losses that would be reported in the net income of the company for each year over the life of the loan. 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.
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60. Prepare any and all journal entries you deem necessary to record the above transaction. 61. Prepare a July 31, 2016 Partial Trial Balance, indicating how each account balance would appear on the company's financial statements. 62. Prepare the journal entries assuming that no forward contract was entered into.
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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$1.2355 December 3, 2015: US$1 = CDN$1.2355 December 31, 2015: US$1 = CDN$1.2455 March 1, 2016: US$1 = CDN$1.2480 63. Prepare any and all journal entries arising from this transaction.
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64. 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. 65. 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.
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Chapter 10 Foreign Currency Transactions Key
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  • Fall '19
  • 1981, Foreign exchange market, United States dollar, 1970

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