Reference no: EM132884764
Questions -
Question 1 - Phan Ltd., a Canadian company, sold goods to a foreign customer for 1,000,000 foreign currency (FC) units, which was equivalent to $500,000 CAD. By the time the customer paid Phan, the exchange rates had changed and 1,000,000 FC units was equivalent to $515,000 CAD. How should the resulting $15,000 CAD difference between the sale and payment dates be treated?
Question 2 - On December 1, 20X5, Gillard Ltd. sold goods to International Traders Ltd., a company located in Switzerland, for 500,000 Swiss francs (CHF). At the date of sale, the spot rate was CHF1 = $1.0329. On the same date, Gillard acquired a 90-day forward contract at a rate of CHF1 = $1.0315. On March 1, 20X6, Gillard received full payment from International Traders and delivered the Swiss francs in execution of the forward contract. The spot rate at March 1, 20X6, was CHF1 = $1.0287. What amount should Gillard record for the sale?
Question 3 - On March 1, 20X2, McBride Ltd. issued a purchase order to Tao Heavy Machines (Singapore) Inc. to acquire a drilling machine for $400,000 SGD. On the same day, McBride entered into a forward contract to receive $400,000 SGD on July 31, 20X2. The machine was delivered on June 1, 20X2, and payment was made July 31, 20X2. McBride has an April 30 year-end. The following information has been provided:
|
Date
|
Spot Rate
|
Forward rate to July 31, 20X2
|
|
March 1, 20X2
|
.7686
|
.7810
|
|
April 30, 20X2
|
.7702
|
.7818
|
|
June 1, 20X2
|
.7940
|
.7985
|
|
July 31, 20X2
|
.7995
|
n/a
|
Assume that the transaction qualifies as a fair-value hedge. At what amount should McBride record the drilling machine?