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 dellvery 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 Journal entry worksheet Record the 500,000 Mexican pesos (MXN) purchase of the carvings on December 1, Year 5 when the spot rate was MXN1 =$0.077. Note: Enter debits before credits. (b) Prepare a balance sheet extract at December 31, Year 5 to show the accounting for the transactions. (Omit $ sign in your response.) (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 2345678> Record the 500,000 Mexican pesos (MXN) purchase of the carvings on December 1 , Year 5 when the spot rate was MXN1 =$0.077. Note: Enter debits before credits. c) Worried that the Canadian dollar may depreciate relative to the MXN, on December 3 , Year 5 , EDI decided to buy a forward ontract 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 345678> Record the 500,000 Mexican pesos (MXN) purchase of the carvings on December 1 , Year 5 when the spot rate was MXN1 =$0.077. Note: Enter debits before credits. (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.)
