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Lagos Brokers is a manufacturer of curtains and engages in numerous import and export activities. Lagos...

Lagos Brokers is a manufacturer of curtains and engages in numerous import and export activities. Lagos receivables and payables in foreign currency units before year-end adjustments on December 31, 2019 are summarized as follows:

Rate on

Foreign Currency Date of Current Rate Settlement Rate

Currency Units Transaction 12/31/19 in 2020

Accounts Receivable

British Pds 40,000 1.280 $1.32 $ 1.350

Euros 70,000 1.180 1.19 1.175

Swiss Francs 80,000 1.09 1.065 1.055

Yen 8,000,000 .010 .0088 .0081

Accounts Payable

Brazilian Real 600,000 .183 .202 .215

Pesos 1,250,000 .046 .043 .041

Yen 7,600,000 .015 .019 .021

REQUIRED:

Determine the amount at which the receivables and payables should be reported in Lagos’ December 31, 2019 balance sheet.

Calculate currency gains and losses that should appear in Lagos’ 2019 and 2020 income statements.

Expert Solution

IAS 21 deals with foreign currency monetray item.

Treatment of Foreign Currency Monetary Item - Monetary items are assets which have a fixed value either recievable or payable in fixed amount of cash.

As per IAS21 Profit/ Loss on foreign curreny monetary item is recognised at the date of balance sheet and also any change is from the balance sheet date is also recognised as profit/loss in the income statement.

Foreign Curreny	Currency Units	Date of Transaction	Rate on Balance Sheet date	Profit/ Loss in 2019	Settlement rate in 2020	Profit/ Loss in 2020

*Accounts Recievable*
British Pounds	40,000	1.28	1.32	1,600	1.35	1,200
Euros	70,000	1.18	1.19	700	1.175	-1,050
Swiss Frans	80,000	1.09	1.065	-2,000	1.055	-800
Yen	80,00,000	0.01	0.0088	-9,600	0.0081	-5,600


*Accounts Payable*
Brazillian real	6,00,000	0.183	0.202	-11,400	0.215	-7,800
Pesos	12,50,000	0.046	0.043	3,750	0.041	2,500
Yen	76,00,000	0.015	0.019	-30,400	0.021	-15,200

			TOTAL	-47,350		-26,750

For 2019 Difference from the transaction date and balance sheet date has to be taken and for 2020 difference between balance sheet date and settlement date has to be taken.

Net Loss in 2019 is $47,350 and in 2020 is $26,750

jeff jeffy answered 2 years ago

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