Question

NWT Ltd. is an outfitter based in Yellowknife that caters mainly to American clients. On January 1, 20X1, NWT Ltd. borrows US$ 300,000 from Norse bank of St. Paul, Minnesota. The annual interest rate is 5%, the term of the loan is four years, and interest is payable annually on December 31. Principal is to be repaid on December 31, 20X4. The relevant foreign exchange rates for 20X1 and 20X2 are:
January 1, 20X1..................... C$ 1.10 = US$ 1.00
December 31, 20X1..................... C$ 1.13 = US$ 1.00
December 31, 20X2................... C$ 1.07 = US$ 1.00

Required
Calculate the exchange gain/ loss on the loan principal for 20X1 and 20X2 that will appear on the financial statements of NWT Ltd.



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  • CreatedMarch 13, 2015
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