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.
Required:
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.