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Mack Ltd

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Mack Ltd. is a Canadian company that reports using IFRS. Mack sells equipment to industrial firms and is involved in foreign-currency transactions both as a purchaser and as a seller. The company had two international transactions in 20x6: it sold equipment to a customer in Thailand and it purchased a specialized piece of equipment from a retailer in Britain. Details of these transactions follow. Mack has a May 31 year end. a) Thai sale On April 30, 20X6 (20x6 fiscal year), Mack reached an agreement to sell equipment to a customer in Thailand and agreed to take payment in Thai baht (B). The equipment was scheduled to be delivered on June 12, 20X6 (20X7 fiscal year), at which time the customer would pay in full. Given Mack's uncertainty about dealing in this unfamiliar currency, on the date the sale was negotiated, the company also arranged with its bank to hedge the transaction. This was the first time that Mack has entered into a formal hedging arrangement for one of its foreign-currency transactions. The sale price of the equipment was B2,500,000 and the cost to manufacture the equipment was C$65,000. Selected information regarding the spot rates and forward rates between the Thai baht and the Canadian dollar was as follows: Forward rate for Date Spot rate delivery June 12, 20X6 April 30, 20X6 B1 = C$0.03200 B1 = C$0.03336 May 31, 20X6 B1 = C$0.03334 B1 = C$0.03385 June 12, 20X6 B1 = C$0.03475 B1 = C$0.03475 The goods were delivered on June 12, 20X6, as per the sales agreement, and the customer paid on the same day. The forward contract was settled on June 12, 20X6, as well. Hedge accounting was not used. Required: Prepare journal entries to record the forward contract and the sale of equipment, including the adjusting entries required at year end and the settlement date. Support the journal entries with a brief explanation as to their nature. Include supporting calculations in the journal entries or reference their location elsewhere on the worksheet.