Question: On January 1 Year 4 a Canadian firm Canuck Enterprises

On January 1, Year 4, a Canadian firm, Canuck Enterprises Ltd., borrowed US$200,000 from a bank in Seattle, Washington. Interest of 7% per annum is to be paid on December 31 of each year during the four-year term of the loan. Principalis to be repaid on the maturity date of December 31, Year 7. The foreign exchange rates for the first two years were as follows:
January 1, Year 4.......... US$1.00 5 CDN$1.38
December 31, Year 4.......... US$1.00 5 CDN$1.41
December 31, Year 5.......... US$1.00 5 CDN$1.35
Exchange rates changed evenly throughout the year.
Determine the exchange gain (loss) on the loan to be reported in the financial statements of Canuck Enterprises for the years ended December 31, Year 4 and Year 5.

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