Part I

Maple Company had the following export and import transactions during $20$X$5$:

On March $1,$ Maple sold goods to a Canadian company for C$$45,000,$ receivable on May $30.$ The spot rates for Canadian dollars were C$$1=$ $$0\mathrm{.}65$ on March $1$ and C$$1=$ $$0\mathrm{.}68$ on May $30.$

On July $1,$ Maple signed a contract to purchase equipment from a Japanese company for $440,000.$ 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 $1=$ $$0\mathrm{.}102$ on July $1,1=$ $$0\mathrm{.}104$ on August $30,$ and $1=$ $$0\mathrm{.}106$ on October $29.$ The $60-$day forward exchange rate on August $30,20$X$5,$ was $1=$ $$0\mathrm{.}1055.$

On November $16,$ Maple purchased inventory from a London company for $25,000,$ payable on January $15,20$X$6.$ The spot rates for pounds were $1=$ $$1\mathrm{.}65$ on November $16,1=$ $$1\mathrm{.}63$ on December $31,$ and $1=$ $$1\mathrm{.}64$ on January $15,20$X$6.$ The forward rate on December $31,20$X$5,$ for a January $15,20$X$6,$ exchange was $1=$ $$1\mathrm{.}645.$

Required:

Prepare journal entries to record Maple$$s import and export transactions during $20$X$5$ and $20$X$6.$

a$-1$

a$-2$

a$-3$

b$.$ What amount of foreign currency transaction gain or loss would Maple report onPart II

Assume that Maple used forward contracts to manage the foreign currency risks of all of its export and import transactions during $20$X$5.$

On March $1,20$X$5,$ Maple, anticipating a weaker Canadian dollar on the May $30,20$X$5,$ settlement date, entered into a $90-$day forward contract to sell C$$45,000$ at a forward exchange rate of C$$1=$ $$0\mathrm{.}64.$ The forward contract was not designated as a hedge.

On July $1,20$X$5,$ Maple, anticipating a strengthening of the yen on the October $29,20$X$5,$ settlement date, entered into a $120-$day forward contract to purchase $440,000$ at a forward exchange rate of $1=$ $$0\mathrm{.}105.$ The forward contract was designated as a fair value hedge of a firm commitment.

On November $16,20$X$5,$ Maple, anticipating a strengthening of the pound on the January $15,20$X$6,$ settlement date, entered into a $60-$day undesignated forward exchange contract to purchase $25,000$ at a forward exchange rate of $1=$ $$1\mathrm{.}67.$

Required:

Prepare journal entries to record Maple$$s foreign currency activities during $20$X$5$ and $20$X$6.$

a$-1$

a$-2$

a$-3$

b$.$ What amount of foreign currency transaction gain or loss would Maple report on its income statement for $20$X$5$ if Parts I and II of this problem were combined?

c$.$ What amount of foreign currency transaction gain or loss would Maple report on its income statement for $20$X$6$ if Parts I and II of this problem were combined? its income statement for $20$X$5?$