EnDur Corp (EDC) is a Canadian company that exports computer software. On February l, Year 2, EDC
Question:
Exchange rates were as follows:
Required:
(a) Assume that the forward contract was designated as a cash flow hedge of the anticipated sale and that the entire balance in accumulated other comprehensive income (AOCI) on April 30 was transferred to sales when the installation was completed. Calculate the following amounts for the financial statements for the year ended June 30, Year 2:
(i) Sales
(ii) Exchange gains/losses
(iii) Cash flows for the period
(b) Assume that EDC could have entered into a three-month forward contract on February 2, Year 2, to hedge the sale of the software with a forward rate of $1 = DK5.15. If so, this forward contract would have fixed the sales price for the software. Also, assume that the amount transferred from AOCI to the sales account on April 30 is the amount required to fix the sales price at the three-month forward rate and the balance of the AOCI is reclassified into net income when EDC received payment from the customer. Calculate the following amounts for the financial statements for the year ended June 30, Year 2:
(i) Sales
(ii) Exchange gains/losses
(iii) Cash flows for the period
(c) Explain the similarities and differences between the account balances under the two scenarios above.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell