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On August 1, 20X4, True North Ltd., a Canadian company, entered into an agreement with...

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On August 1, 20X4, True North Ltd., a Canadian company, entered into an agreement with Langdon Ltd., a foreign company, to purchase inventory for 400,000FC. The inventory is to be delivered on January 31,205. In accordance with the agreement, True North will make payment on February 14,205. On August 1, 20X4, True North's bank arranged for a 400,000FC hedge against True North's commitment to Langdon. The spot rate on August 1 was 1FC=$2.50CDN and the February 14,205 forward rate was 1FC=$2.542CDN. At True North's December 31,204 year-end, the spot rate was 1FC=$2.52CDN and the forward rate to February 14 , 20X5 was 1FC = $2.55CDN. When Langdon delivered the merchandise to True North on January 31,205, the spot rate was 1FC=$2.54CDN and the forward rate was 1FC=$2.56CDN. True North paid Langdon on February 14 , as required. On that date, the spot rate was 1FC=$2.565 CDN. Required: The hedge arranged by True North is a cash hedge. Prepare the journal entries to record the acquisition of the inventory and the related hedge through to February 14,205, using the gross method

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