Record the revaluation of the foreign currency

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Reference no: EM132212321

Question: Assume that Maple used forward contracts to manage the foreign currency risks of all of its export and import transactions during 20X5.

1. On March 1, 20X5, Maple, anticipating a weaker Canadian dollar on the May 30, 20X5, settlement date, entered into a 90-day forward contract to sell C$48,000 at a forward exchange rate of C$1 = $0.64. The forward contract was not designated as a hedge.

2. On July 1, 20X5, Maple, anticipating a strengthening of the yen on the October 29, 20X5, settlement date, entered into a 120-day forward contract to purchase 420,000 at a forward exchange rate of Â¥1 = $0.105. The forward contract was designated as a fair value hedge of a firm commitment.

3. On November 16, 20X5, Maple, anticipating a strengthening of the pound on the January 15, 20X6, settlement date, entered into a 60-day undesignated forward exchange contract to purchase Â£28,000 at a forward exchange rate of Â£1 = $1.67.

a.1 Prepare journal entries to record Mapleâ€^TMs foreign currency activities during 20X5 and 20X6.

Record the entry for the 90-day forward contract signed for the forecasted foreign currency transaction.

Record the revaluation of the foreign currency.

Record the payment to the exchange broker in accordance with the forward contract.

Record the receipt of cash from the exchange broker.

a.2 Record the entry for the 120-day forward contract signed for the forecasted foreign currency transaction.

Record the revaluation of the foreign currency.

Record the loss on the financial instrument aspect of the firm commitment.

Record the acquisition of the equipment.

Record the revaluation of the foreign currency.

Record the payment of cash to the exchange broker.

Record the receipt of foreign currency.

a.3 Record the entry for the signed 60-day undesignated forward contract.

Record the revaluation of the foreign currency.

Record the payment of cash to the exchange broker.

Record the receipt of foreign currency.

b. What amount of foreign currency transaction gain or loss would Maple report on its income statement for 20X5 if Parts I and II of this problem were combined

c. What amount of foreign currency transaction gain or loss would Maple report on its income statement for 20X6 if Parts I and II of this problem were combined?

Reference no: EM132212321

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