FE16 (7 Marks)

During its 2019 fiscal year, Farewell Inc. derecognized two investments in financial assets, details of which follow:

An investment classified as FVPL sold for its fair value of $280,000; the carrying value of the investment was $290,000.

An investment in a debt security classified as FVOCI sold for its fair value of $406,000; the carrying value of the investment was $392,000 and the credit balance in AOCI pertaining to this investment was $20,000.

Required: Prepare the journal entries for Farewell to account for the following:

a) Derecognizing the investment at FVPL

b) Updating the investment at FVOCI to fair value immediately prior to derecognition

c) Derecognizing the investment at FVOCI

FE17 (8 Marks)

On October 1, 2021, a Canadian firm sold and delivered merchandise to an Indian company for 250,000,000 rupees (INR). The terms of the invoice were net 90 days.

The Canadian firm's year end is November 30, 2021. The following exchange rates are available:

October 1, 2021 90-day forward rate INR 1 = C$0.0180

October 1, 2021 Spot rate INR 1 = C$0.0200

November 30, 2021 Spot rate INR 1 = C$0.0185

November 30, 2021 30-day forward rate INR 1 = C$0.0175

December 30, 2021 Spot rate INR 1 = C$0.0177

Required:

Prepare journal entries to record the events for each of the following independent situations: a) No forward contract is taken out to offset the receivable, and the customer pays in 90 days on December 30, 2021. b) A 90-day forward contract is taken out on October 1, 2021, and the customer pays in 90 days on December 30, 2021.