Question $4(16$ marks$)$

CSNY Inc. purchased equipment for US $$100,000$ on Deco on January $31,$

Our year end is December $31,$ and the payable forward exchange

Year $6.$ On December $1,$ Year $5,$ we entered into a dollars on January $31,$

contract with the bank to provide us with the US dollars on January $31.$

Year $6.$

The following rates were in effect:

Forward Rates:

December $1,$ Year $5$; $60$ day forward rate

December $31,$ Year $5$;$30$ day forward rate

Spot rates:

December $1,$ Year $5$

December $31,$ Year $5$

January $31,$ Year $6$

US $$1=$ CDN $$1\mathrm{.}152$

US $$1=$ CDN $$1\mathrm{.}162$

$US$ $$1=CDN$ $$1\mathrm{.}130$

$US$ $$1=CDN$ $$1\mathrm{.}16$

US $$1=$ CDN $$1\mathrm{.}210$

Required:

Prepare all the journal entries arising from this transaction, from original

sale to final settlement. CSNY prepares a journal entry to recognize the

hedge at inception. Use proper account titles throughout.

December $1,$ Year $5$

US $$1=CDN$$$1\mathrm{.}130$

December $31,$ Year $5$

US $$1=$ CDN $$1\mathrm{.}16$

January $31,$ Year $6$

US $$1=C$ Time left $2$:$56$:$36$

Required:

Prepare all the journal entries arising from this transaction, from original

sale to final settlement. CSNY prepares a journal entry to recognize the

hedge at inception. Use proper account titles throughout.