Wayne Limited purchased a capital asset from France for €500,000. The asset was delivered to Wayne Limited on November 1, 2005. Wayne Limited agreed to pay the supplier in full on February 1, 2006. The payment was made as agreed.

The exchange rates were as follows:

Required:

a. Prepare journal entries for 2005 and 2006 to record the above information.

b. Assume that Wayne Limited hedged the obligation on November 1, 2005.
The forward rate was C$1.00 = €0.64. Prepare the appropriate journal entries for 2005 and 2006.

Transcribed Image Text:

November 1, 2005 December 31, 2005 February 1, 2006 C$1.00 0.70 C$1.00-0.60 C$1.00-0.62