Advanced Accounting
7th Edition
ISBN: 9781119373209
Author: JETER, Paul K. Chaney
Publisher: WILEY
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Question
Chapter 12, Problem 2P
A.
To determine
Prepare
B.
To determine
Describe the income statement treatment given to any transaction gains and losses identified as on December 31.
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8. Assume that your company purchases inventories from a supplier on December 15. The invoice specifies that payment is to be made on March 15 in Euros in the amount of 10,000 Euros. Your company operates on a calendar year basis. Assume the following exchange rates and the company does not enter into any hedging arrangements:
December 15
$1.35 :1 Euro
December 31
$1.37 :1 Euro
March 15
$1.38 :1 Euro
Requirement: Prepare the journal entry that needs to be made on March 15
On 1 December 2019, Company EX, with a functional currency and presentation currency in HKD, sold and deliver an inventory to a customer in Paris at EUR10,000. EX has received the money only in 2020.
Exchange rate of EUR/HKD was 8.79 and 8.96 respectively on 1 December 2019 and 31 December 2019.
Required: Prepare the journal entries for EX in HKD for the year ended 31 December 2019
Foreign currency transactions
Use the following information for the next two questions:
On December 1, 20x1, Entity A sells good to Entity B, on credit, for a total sale price of $1,000.
Entity B settles the account on January 6, 20x1. Entity A's functional currency is the Philippine
peso (P). The relevant exchange rate are as follows:
Dec. 1, 20x1
Dec. 31, 20x1
Jan. 6, 20x1
P50:$1
P52:$1
P41:$1
How much is the foreign exchange gain (loss) to be recognized by Entity A on December 31,
20x1?
Chapter 12 Solutions
Advanced Accounting
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- Recording Export Transactions Daisy Brands, a U.S. company, sells items abroad. Daisy prices many of these transactions in the currency of the customer. Following are four such transactions made in the last accounting period, plus the direct exchange rates for each date: Country Amount Currency Spot rate at sale Spot rate at collection Argentina . . . . . . . . . . . . . . . . . . . . . . 250,000 Peso $0.056 $0.049 Canada . . . . . . . . . . . . . . . . . . . . . . . . 400,000 Dollar 0.732 0.713 India . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 Rupee 0.016 0.018 South Africa . . . . . . . . . . . . . . . . . . . . 100,000 Rand 0.074 0.077 Required Prepare the journal entries made by Daisy Brands to record the above sale and collection transactionsarrow_forwardForeign currency transactions Melbourne Ltd purchased goods from France on 3 April 2022 on credit shipped FOB Paris. The cost of good is Euro 500,000 and outstanding as of 31 April 2021. On 3 April 2022, the exchange rate is A$1.00 = Euro 0.67. On 30 April 2022, exchange rate is A$1.00 = Euro 0.66 REQUIRED Provide the accounting entries necessary to account for the above purchase transaction for the month ending 30 April 2022.arrow_forwardI. A. Prepare all entries on the Phil. firm’s books to record the above transactions B. Determine the following: Foreign exchange gain or loss on:i. December 1, 20x4ii. December 31, 20x4iii. March 1, 20x5 On December 31, 20x4:i. Accounts payableii. Inventory Part 2 REQUIRED: Translate (translation working paper) the financial statements of GoldCorporation into the presentation currency which is Philippine peso.arrow_forward
- Journal entries for an account payable denominated in Mexican Pesos ($US weakens and strengthens) Assume that your company purchases inventories from a Mexican supplier on December 15. The invoice specifies that payment is to be made on March 15 in Mexican Pesos (Peso) in the amount of 350,000 Pesos. Your company operates on a calendar year basis. Assume the following exchange rates: December 15 $0.046:1 Peso December 31 $0.053:1 Peso March 15 $0.050:1 Peso Prepare the journal entries to record the purchase (assume perpetual inventory accounting), the required adjusting entry at December 31, and the payment on March 15. General Journal Date Description Debit Credit Accounts payable Accounts payable Dec 15 Inventory Dec 31 Foreign currency transaction loss Mar 15 Accounts payable ÷ 16,100 0 0 16,100 2,450 0 0 2,450 28,000 × 0 Foreign currency transaction gain 0 10,500 x Cash 0 17,500arrow_forwardQuestion 1: During December 2019 of the current year, Wiley Systems, Inc., a company based in Seattle, Washington, entered into the following transactions: Dec. 12: Purchased computer chips from a Taiwan company. Contract was denominated in 125,000 Taiwan dollars. Direct exchange rate on this date was $.0391. Inventory received 12/12/2019 and 125,000 Taiwan dollars paid on 1/10/2020 Assume that on December 31 the direct exchange rates was Taiwan dollar $.0351. Assume that the direct exchange rate on the settlement date was Taiwan dollar $.0398. a) Prepare the journal entry for purchase on the books of Wiley Systems, Inc. b) Prepare journal entry necessary to adjust the account as of December 31 c) Prepare journal entry to record settlement of account on January 10. Prepare journal entry to record settlement of account on January 10.arrow_forwardThe entity sold its inventory to a foreign entity with credit term of n/60. On the 60th day from invoice, the entity accepted the $200 payment from a client. It converted this amount on the spot rate. The entity's approach to the foreign exchange risk is A. AvoidanceB. MitigationC. Acceptancearrow_forward
- 1. On November 1, 2020, an entity acquired on account goods from a foreign supplier at a cost of $3,000. The accounts payable are paid on January 30, 2021. On December 1, 2020, an entity sold on account goods to a foreign customer at a selling price of $2,500. The accounts receivable is collected on February 28, 2021. The entity is operating in Philippine economy wherein the functional currency is the Philippine Peso. The following exchange rates are provided Buying spot rate Selling spot rate November 1, 2020 P40 P42 December 1, 2020 39 40 December 31, 45 45.5 2020 January 30, 2021 45.5 46 February 28, 2021 46 46.5 What is the carrying amount of monetary asset on December 31, 2020?arrow_forwardTristan Narvaja, S.A. (A). Tristan Narvaja, S.A., is the Uruguayan subsidiary of a U.S. manufacturing company. Its balance sheet for January 1 is shown in the popup window, E. The January 1 exchange rate between the U.S. dollar and the peso Uruguayo ($U) is $U24/$. Determine Tristan Narvaja's contribution to the translation exposure of its parent on January 1, using the current rate method. a. Determine Tristan Narvaja's contribution to the translation exposure of its parent on January 1st, using the current rate method. b. Calculate Tristan Narvaja's contribution to its parent's translation loss if the exchange rate on December 31st is $U24/$. Assume all peso Uruguayo accounts remain as they were at the beginning of the year. a. Using the current rate method, what is Tristan Narvaja's contribution to the translation exposure of its parent on January 1st? $U (Round to the nearest peso Uruguayo.)arrow_forwardJournal entries for an accounts receivable denominated in Swiss Francs ($US strengthens and weakens) Assume that your company sells products to a customer located in Switzerland on November 20. The invoice specifies that payment is to be made on February 20 in Swiss Francs (CHF) in the amount of CHF 250,000. Your company operates on a calendar year basis. Assume the following exchange rates: November 20 $1.12:1CHF December 31 $1.09.1CHF February 20 $1.11:1CHF Prepare the journal entries to record the sale (ignore cost of goods sold), the required adjusting entry at December 31, and the receipt of payment February 20. Description Date 11/20 Accounts receivable Sales 12/31 Foreign currency transaction loss Accounts receivable 2/20 Cash Accounts receivable Accounts receivable Debit + ✓ 250,000 x + ✓ ✓ # ✓ 0✓ 10,000 x 0✓ ÷ ✓ 277,500✔ ooo 4 x 0✔ 0✓ Credit 0✓ 250,000 x 0✓ 10,000 x 277,500 x 0xarrow_forward
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