FUND.ACCT.PRIN.
25th Edition
ISBN: 9781260247985
Author: Wild
Publisher: RENT MCG
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Chapter 15A, Problem 21QS
To determine
Concept Introduction:
Foreign Exchange Rate: It refers to the price of one currency which is expressed in terms of the currency of another country. In other words, the foreign exchange rate is the rate at which the currency of two countries is exchanged.
To prepare:
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2 XYZ Company sells goods to a foreign customer on June 8. Payment of 3,000,000 foreign currency units (FC) is due in one month. June 30 is XYZ Company’s fiscal year-end. The following exchange rates were in effect during the period:
June 8 Spot rate $1.10
June 8 30 day forward rate $1.15
June 30 Spot rate $1.14
July 8 Spot rate $1.20
A For what amount should XYZ Accounts Receivable be debited on June 8
B How much foreign exchange gain or loss should XYZ record on June 30
Journal entries for an account payable denominated in Mexican Pesos ($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
$0.050:1 Peso
Prepare the journal entries to record the purchase (assume perpetual inventory accounting), the required adjusting entry at December 31, and the payment on March 15.
General Journal
Date
Description
Debit
Credit
Accounts payable
Accounts payable
Dec 15 Inventory
Dec 31 Foreign currency transaction loss
Mar 15 Accounts payable
÷
16,100
0
0
16,100
2,450
0
0
2,450
28,000 ×
0
Foreign currency transaction gain
0
10,500 x
Cash
0
17,500
Finance
14. On June 1, a calendar year U.S. manufacturer
sells, on 60-day credit, goods to Oman importer
for US$ 1,000,000. The Dollar/Rial exchange rate
is $1 = OMR 0.30 on June 1, $1 = OMR O.40 on
June 30, and $1 = OMR 0.41 on August 1.
Required: Prepare dated journal entries in Omani
Rials to record the incurrence and settlement of
this foreign currency transaction assuming it
employs a two-transaction perspective.
Knowledge Booster
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