QUESTION $1(10$ marks$)$

Questions $1$ through $2$ are based on the following information:

On April $1,2022,$ Balsam Inc., a Canadian public company, issues $1,250,000$ in long$-$term debt to

lenders in the United Kingdom. The debt pays interest at an annual rate of $12$ percent, with payments due

on March $31$ of each year. The debt matures on March $31,2027.$ Balsam closes its books on December

$31$ and prepares its financial statements in Canadian dollars. As a consequence, all amounts relating to

this debt must be translated. Relevant exchange rates are as follows:

April $1,2022$

December $31,2022$

April $1,2023$

July $1,2023$

October $1,2023$

$1=C$$$2\mathrm{.}38$

$1=C$$$2\mathrm{.}32$

$1=C$$$2\mathrm{.}34$

$1=C$$$2\mathrm{.}36$

$1=C$$$2\mathrm{.}38$

$1=C$$$2\mathrm{.}40$

December $31,2023$

The Interest Expense relating to the long$-$term debt that will be reported in Balsam's Income

Statement for the year ending December $31,2022$would be:

a$.$ $$261,000.$

b$.$ $$264,375.$

c$.$ $$267,750.$

d$.$ $$348,000.$

e$.$ $$352,500.$

The Exchange Gain $($Loss$)$ on the long$-$term debt that would be reported in Balsam's Income

Statement for the year ending December $31,2023$ would be:

a$.$ a loss of $$8,529.$

b$.$ a gain of $$8,529.$

c$.$ a loss of $$36,250.$

d$.$ a loss of $$100,000.$

e$.$ a gain of $$100,000.$

At the balance sheet date, monetary items denominated in a foreign currency should be adjusted to

reflect the exchange rate in effect at the:

a$)$ time of settlement of the contract

b$)$ time the sale was recorded

c$)$ balance sheet date

d$)$ time of payment