Question

On October 2, 2013, a Canadian company contracts with a U.S. winery for delivery from the winery of 1,000 cases of wine at a price of U.S. $100,000. The wine is to be delivered February 1, 2014, and payment made in U.S. dollars on March 31, 2014. In order to hedge this future commitment, the Canadian company purchases U.S. $100,000 for delivery in 180 days at a forward exchange rate of $C1 = $US 0.775. The company has a December 31 year end.
Required
(a) Prepare the journal entries in 2013 and 2014 assuming that hedge accounting is not used.
(b) Prepare the journal entries in 2013 and 2014 assuming that the Canadian company has elected to use hedge accounting.
(c) Prepare the journal entries in 2013 and 2014 assuming that the Canadian company has elected to follow ASPE and uses hedge accounting.
(d) Indicate the balances in inventory, derivatives on the statement of financial position and the foreign exchange gains or losses on the statement of comprehensive income for 2013 and 2014 year-end under each of the scenarios above.


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  • CreatedJune 09, 2015
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