An American company sells merchandise on account to a Swiss company for CHF 50,000 on 1/12/2019...

An American company sells merchandise on account to a Swiss company for CHF 50,000 on 1/12/2019 when the rate was 1 CHF = 0.9 USD. On 31/12/2019 the rate was 1 CHF = 0.96 USD. On 25/1/2020 the Swiss company pays its obligation to the US company (the rate was 1 CHF = 1.01 USD), which keeps the foreign cash it and converts the amount to US dollars on 10/2/2020, when the rate was 1 CHF = 0.99 USD. Required: Provide the journal entries on each of the above mentioned dates (Note: CHF means Swiss franc). NOTE: IF YOU CANNOT CLEARLY WRITE THE JOURNAL ENTRIES LIKE YOU WOULD ON A PAPER EXAM, PLEASE MENTION dr OR cr NEAR EACH ACCOUNT IN THE JOURNAL ENTRY AS APPROPRIATE.

Solutions

Expert Solution

Facts of the case
Domestic Currency	USD
Foreign Currency	Swiss Franc
As Being American Company material sold for CHF 50000

01-12-2019	Transaction Date	1 CHF = 0.9 USD
31-12-2019	Clsoing rate	1 CHF = 0.96 USD
25-01-2020	Pay obliagtion	1 CHF = 1.01 USD
Converts the foreign cash on
10-02-2020			1 CHF = 0.99 USD

Date	Accounts Description	Dr	Cr
01-12-2019	Account Receivable A/c Dr.	55,556
	To Sale A/c		55,556
	( Being Receivable recorded at 0.9 USD)
31-12-2019	Exchange Loss A/c	3472
	To Account Receivable		3472
	( Being transactional loss booked)
25-01-2020	Foreign Exchange Currency A/c	49505
	Exchange Loss A/c	2578
	To Account Receivable		52083
	( Being receivable settled)
10-02-2020	Cash A/c Dr.	50505
	To foreign Exchange Currency A/c		49505
	Exchange Gain A/c		1000
	( Being Foreign currency settled)

ekkarill92 answered 1 year ago

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