On July 1, 2019, Great White North (GWN) Inc. purchased merchandise from a supplier in the U.S. for US$800,000 with terms requiring full payment by October 31, 2019. On July 2, 2019, GWN entered into a forward contract to purchase US$800,000 on October 31, 2019 at a rate of CDN$1.2275. The forward contract was designated as a hedge of the fair value of the amount due to the supplier.
On October 31, 2019, GWN paid its supplier in full. Selected dates and spot rates are shown below:
$\begin{array}{|l|r|}\hline \text { July } 1,2019 & \text { CDN \$1.2150 } \\\hline \text { July 31,2019 } & \text { CDN \$1.2175 } \\\hline \text { October } 31,2019 & \text { CDN \$1.22 } \\\hline\end{array}$ GWN has a July 31^st year end. On that date the forward rate for US dollars for three months was CDN $1.2225.
Prepare a July 31, 2019 Partial Trial Balance, indicating how each account balance would appear on the company's financial statements.

Question

On July 1, 2019, Great White North (GWN) Inc. purchased merchandise from a supplier in the U.S. for US$800,000 with terms requiring full payment by October 31, 2019. On July 2, 2019, GWN entered into a forward contract to purchase US$800,000 on October 31, 2019 at a rate of CDN$1.2275. The forward contract was designated as a hedge of the fair value of the amount due to the supplier.
On October 31, 2019, GWN paid its supplier in full. Selected dates and spot rates are shown below:

\begin{array}{|l|r|}\hline \text { July } 1,2019 & \text { CDN \$1.2150 } \\\hline \text { July 31,2019 } & \text { CDN \$1.2175 } \\\hline \text { October } 31,2019 & \text { CDN \$1.22 } \\\hline\end{array}

GWN has a July 31^st year end. On that date the forward rate for US dollars for three months was CDN $1.2225.
Prepare a July 31, 2019 Partial Trial Balance, indicating how each account balance would appear on the company's financial statements.

Dylan Haydt · Accepted Answer

Final Answer :   Partial Trial Balance:   Debit   Credit   Inventory (if not yet sold)  $ 972 , 000   B / S  Accounts Payable  $ 974 , 000   B / S  Hedge expense  $ 2 , 500 S C I  Forward Contract  $ 4 , 000   B / S  Exchange Gains and Losses-   OCI (forward)  $ 3 , 500 S C I  Totals  $ 978 , 000 $ 978 , 000 \begin{array}{|l|r|r|r|}\hline 	ext { Partial Trial Balance: }  &  	ext { Debit }  &  	ext { Credit } \\hline 	ext { Inventory (if not yet sold) }  &  \$ 972,000  &   &  \mathrm{~B} / \mathrm{S} \\hline 	ext { Accounts Payable }  &   &  \$ 974,000  &  \mathrm{~B} / \mathrm{S} \\hline 	ext { Hedge expense }  &  \$ 2,500  &   &  \mathrm{SCI} \\hline 	ext { Forward Contract }  &   &  \$ 4,000  &  \mathrm{~B} / \mathrm{S} \\hline \begin{array}{lr}	ext { Exchange Gains and Losses- } \	ext { OCI (forward) }\end{array}  &  \$ 3,500  &   &  \mathrm{SCI} \\hline 	ext { Totals }  &  \$ 978,000  &  \$ 978,000  & \\hline\end{array}  Partial Trial Balance:   Inventory (if not yet sold)   Accounts Payable   Hedge expense   Forward Contract   Exchange Gains and Losses-   OCI (forward)  ​  Totals  ​  Debit  $972 , 000 $2 , 500 $3 , 500 $978 , 000 ​  Credit  $974 , 000 $4 , 000 $978 , 000 ​   B / S   B / S SCI   B / S SCI ​ ​

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