Part \(I\)

Maple Company had the following export and import transactions during 20X5:

1. On March 1, Maple sold goods to a German company for 30,000 marks, receivable on May 30. The spot rates for marks were DM \(1=\$ .65\) on March 1 and DM \(1=\$ .68\) on May 30 .

2. On July 1, Maple signed a contract to purchase equipment from a Japanese company for 500,000 yen. The equipment was manufactured in Japan during August and was delivered to Maple on August 30, with payment due in 60 days on October 29. The spot rates for yen were \(¥ 1=\$ .102\) on July 1 , \(¥ 1=\$ .104\) on August 30 , and \(¥ 1=\$ .106\) on October 29 . The 60 -day forward exchange rate on August \(30,20 \times 5\), was \(¥ 1=\$ .1055\).

3. On November 16, Maple purchased inventory from a London company for 10,000 pounds, payable on January 15, 20X6. The spot rates for pounds were \(£ 1=\$ 1.65\) on November \(16, £ 1\) \(=\$ 1.63\) on December 31 , and \(£ 1=\$ 1.64\) on January 15, 20X6. The forward rate on December 31. 20X5, for a January \(15,20 \mathrm{X} 6\). exchange was \(£ 1=\$ 1.645\).

\section*{Required Part I}

a. Prepare journal entries to record Maple's import and export transactions during 20X5 and 20X6.

b. What amount of foreign currency transaction gain or loss would Maple report on its income statement for 20X5?

2. On July 1, 20X5, Maple, anticipating a strengthening of the yen on the October 29.20X5, settlement date, entered into a 120 -day forward contract to purchase 500,000 yen at a forward exchange rate of \(¥ 1=\$ .105\).
3. On November 16, 20X5, Maple, anticipating a strengthening of the pound on the January 15 . 20X6, settlement date, entered into a 60 -day forward exchange contract to purchase 10,000 pounds at a forward exchange rate of \(£ 1=\$ 1.67\).
\section*{Required Part II}

a. Prepare journal entries to record Maple's hedging activities during 20X5 and 20X6.

b. What amount of foreign currency transaction gain or loss would Maple report on its income statement for \(20 \mathrm{X} 5\), combining both Parts I and II of this problem?

c. What amount of foreign currency transaction gain or loss would Maple report on its statement of income for \(20 \mathrm{X} 6\), combining both Parts I and II of this problem?