Reference no: EM132499581
XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in U.S. dollars. XYZ does not hedge to minimize its foreign exchange risk.
The following exchange rates were in effect throughout the term of the loan:
January 1, 2019US $1 = CDN $1.1500
December 31, 2019US $1 = CDN $1.1490
December 31, 2020US $1 = CDN $1.1485
December 31, 2021US $1 = CDN $1.1483
December 31, 2022US $1 = CDN $1.1487
The average rates in effect for 2019 and 2020 were as follows:
2019:US $1 = CDN $1.14932020:US $1 = CDN $1.1487
Question 1: What is the amount of the foreign exchange gain or loss recognized on the 2019 Income Statement as a result of revaluing the loan payable?
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