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Canada Corp. sells raw lumber to a number of countries around the world. On December...

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Accounting

Canada Corp. sells raw lumber to a number of countries around the world. On December 1, 2016 the company shipped some lumber to a client in Japan. The selling price was established at 500,000 Yen with payment to be received on March 1, 2017.

On December 3, 2016 the company entered into a hedge with a Canadian Bank at the 90 day forward rate of 1 Yen = CDN$1.185. The forward contract was designated as a fair value hedge of the receivable from the Japanese customer.

Canada Corp received the payment from its Japanese client on March 1, 2017. Canada Corp's year end is on December 31.

Selected spot rates were as follows:

December 1, 2016:

1 Yen = CDN$1.155

December 3, 2016:

1 Yen = CDN$1.155

December 31, 2016:

1 Yen = CDN$1.1625

March 1, 2017:

1 Yen = CDN$1.1750

The two-month forward rate on December 31, 2016 was 1Yen = CDN$1.1800.

  1. Prepare any and all journal entries arising from this transaction.image

  2. Prepare the journal entries to record the receipt of the 500,000 Yen on March 1, 2017, assuming that Canada Corp did not enter into a hedge transaction in December 2016.

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