Equitable Diversity International Inc. (EDI) buys and sells artwork from all over the world. On September...

 
 
 
  

 
 
 
 

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Equitable Diversity International Inc. (EDI) buys and sells artwork from all over the world. On September 1, Year 5, EDI agreed to purchase some paintings from a seller in Mexico at a price of 500,000 Mexican pesos (MXN) when the spot rate was MXN1 = $0.064. EDI took delivery of the paintings on December 1, Year 5 when the spot rate was MXN1 = $0.077. The invoice required EDI to make payment by April 1, Year 6. The fiscal year-end of EDI is December 31, and on this date the spot rate was MXN1 = $0.075. EDI made payment on April 1, Year 6, when the spot rate was MXN 1 = $0.060. Required: (a) Prepare the journal entries to record (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) (i) the purchase of the carvings in Year 5 (ii) any adjustments required on December 31, Year 5 View transaction list Journal entry worksheet 1 2 Record the 500,000 Mexican pesos (MXN) purchase of the carvings on December 1, Year 5 when the spot rate was MXN1 = $0.077. Journal entry worksheet 1 2 Record the gain on loss on the carvings on December 31, Year 5, if the exchange rate is MXN1 = $0.075. (b) Prepare a balance sheet extract at December 31, Year 5 to show the accounting for the transactions. (Omit $ sign in your response.) Equity Diversity International Inc. Balance Sheet at December 31, Year 5 Assets Receivable from bank Liabilities Accounts payable (MXN) Equity Retained earnings $ $ $ 38500 37500 1000 (c) Worried that the Canadian dollar may depreciate relative to the MXN, on December 3, Year 5, EDI decided to buy a forward contract from the Royal Bank at the 120-day forward rate of MXN1 = $0.079 when the spot rate was still MXN1 = $0.077. On December 31, Year 5, the forward rate with maturity on April 1, Year 6 was MXN1=$0.078. No hedge accounting is applied. (i) Show all the journal entries to record both the purchase and the forward contracts for both Year 5 and Year 6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet 1 2 3 4 5 6 7 8 Record the 500,000 Mexican pesos (MXN) purchase of the carvings on December 1, Year 5 when the spot rate was MXN1 = $0.077. Journal entry worksheet 1 2 3 4 5 6 7 8 Record the purchase of forward contract from the Royal Bank at the 120-day forward rate of MXN1 = $0.079 when the spot rate was still MXN1 = $0.077. > Journal entry worksheet 1 2 3 4 5 6 7 Record the gain on loss on the cravings on December 31, Year 5. 8 Journal entry worksheet 1 2 3 4 5 6 7 8 Record the gain on loss on the forward contract on December 31, Year 5. > Journal entry worksheet < 1 2 3 4 5 6 7 Record the gain on loss on the cravings on April 1, Year 6. 8 Journal entry worksheet < 1 2 3 4 5 6 7 Record the gain on loss on the cravings on April 1, Year 6. 8 Journal entry worksheet < 1 2 3 4 Note: Enter debits before credits. 5 6 7 8 Record the gain on loss on the forward contract on April 1, Year 6. Journal entry worksheet < 1 2 3 4 5 6 Note: Enter debits before credits 7 8 Record the settlement of forward contract in cash on April 1, Year 6. Journal entry worksheet 1 2 3 4 Nota: Entor dobits boforo credits 5 6 7 8 Record the payment for purchase of cravings in cash on April 1, Year 6. (ii) Show the balance sheet and income statement extracts for both the purchase and the forward contract for Year 5. (Omit $ sign in your response.) Equity Diversity International Inc. Balance Sheet at December 31, Year 5 Assets (Click to select) Liabilities Accounts payable (MXN) (Click to select) Equity Retained earnings Equity Diversity $ Income Statement $ $ 38500 39500 International Inc. 1000 For the period ended December 31, Year 5 Other Income Foreign exchange gain $ 1000 Equitable Diversity International Inc. (EDI) buys and sells artwork from all over the world. On September 1, Year 5, EDI agreed to purchase some paintings from a seller in Mexico at a price of 500,000 Mexican pesos (MXN) when the spot rate was MXN1 = $0.064. EDI took delivery of the paintings on December 1, Year 5 when the spot rate was MXN1 = $0.077. The invoice required EDI to make payment by April 1, Year 6. The fiscal year-end of EDI is December 31, and on this date the spot rate was MXN1 = $0.075. EDI made payment on April 1, Year 6, when the spot rate was MXN 1 = $0.060. Required: (a) Prepare the journal entries to record (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) (i) the purchase of the carvings in Year 5 (ii) any adjustments required on December 31, Year 5 View transaction list Journal entry worksheet 1 2 Record the 500,000 Mexican pesos (MXN) purchase of the carvings on December 1, Year 5 when the spot rate was MXN1 = $0.077. Journal entry worksheet 1 2 Record the gain on loss on the carvings on December 31, Year 5, if the exchange rate is MXN1 = $0.075. (b) Prepare a balance sheet extract at December 31, Year 5 to show the accounting for the transactions. (Omit $ sign in your response.) Equity Diversity International Inc. Balance Sheet at December 31, Year 5 Assets Receivable from bank Liabilities Accounts payable (MXN) Equity Retained earnings $ $ $ 38500 37500 1000 (c) Worried that the Canadian dollar may depreciate relative to the MXN, on December 3, Year 5, EDI decided to buy a forward contract from the Royal Bank at the 120-day forward rate of MXN1 = $0.079 when the spot rate was still MXN1 = $0.077. On December 31, Year 5, the forward rate with maturity on April 1, Year 6 was MXN1=$0.078. No hedge accounting is applied. (i) Show all the journal entries to record both the purchase and the forward contracts for both Year 5 and Year 6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet 1 2 3 4 5 6 7 8 Record the 500,000 Mexican pesos (MXN) purchase of the carvings on December 1, Year 5 when the spot rate was MXN1 = $0.077. Journal entry worksheet 1 2 3 4 5 6 7 8 Record the purchase of forward contract from the Royal Bank at the 120-day forward rate of MXN1 = $0.079 when the spot rate was still MXN1 = $0.077. > Journal entry worksheet 1 2 3 4 5 6 7 Record the gain on loss on the cravings on December 31, Year 5. 8 Journal entry worksheet 1 2 3 4 5 6 7 8 Record the gain on loss on the forward contract on December 31, Year 5. > Journal entry worksheet < 1 2 3 4 5 6 7 Record the gain on loss on the cravings on April 1, Year 6. 8 Journal entry worksheet < 1 2 3 4 5 6 7 Record the gain on loss on the cravings on April 1, Year 6. 8 Journal entry worksheet < 1 2 3 4 Note: Enter debits before credits. 5 6 7 8 Record the gain on loss on the forward contract on April 1, Year 6. Journal entry worksheet < 1 2 3 4 5 6 Note: Enter debits before credits 7 8 Record the settlement of forward contract in cash on April 1, Year 6. Journal entry worksheet 1 2 3 4 Nota: Entor dobits boforo credits 5 6 7 8 Record the payment for purchase of cravings in cash on April 1, Year 6. (ii) Show the balance sheet and income statement extracts for both the purchase and the forward contract for Year 5. (Omit $ sign in your response.) Equity Diversity International Inc. Balance Sheet at December 31, Year 5 Assets (Click to select) Liabilities Accounts payable (MXN) (Click to select) Equity Retained earnings Equity Diversity $ Income Statement $ $ 38500 39500 International Inc. 1000 For the period ended December 31, Year 5 Other Income Foreign exchange gain $ 1000