Prepare the foreign exchange journal entries of Allen

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Question - Allen Ltd. purchased Euro 800,000 equipment from a Swiss company on January 1, 2016. The terms of the note payable called for annual interest payments at the market rate of 6% on December 31 each year. The principal is to be paid off in full on December 31, 2018. The foreign exchange rates for 2016 are as follows.

January 1, 2016 Euro1 = C$1.42

2016 average rate Euro1 = C$1.43

December 31, 2016 Euro1 = C$1.40

REQUIRED -

a) Prepare the foreign exchange journal entries of Allen Ltd. required for the fiscal year ending December 31, 2016.

b) Indicate two measures that Allen Ltd. may have employed to hedge the above note payable from changes in foreign exchange rates.

Reference no: EM132572556

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