Question

You (US company) imported Earth Moving Equipment (EME) from Australia. You imported EME at US$ 300 (with Cash) on Dec 1, 2018. On Dec 15, 2018, you sold EME to Australia at A$400 (Australian $) in AR. The exchange rate on Dec 15, 2018 was 2 A$/US$. The exchange rate on Dec 31, 2018 was 4 A$/US$. On Feb 1, 2019, your customer paid you in full. The exchange rate on Feb 1 was 1 A$/US$. What were NI in 2018 and 2019, respectively? 100, 200 -100, 300 -200, 200 100, 100

Answer 1

	JOURNAL ENTRY
	Date	Account Title	Debit	Credit	Calculation
	Dec1,2018	Earth Moving Equipment	$300
		Cash		$300
	Dec,15,2018	Accounts Receivable	$200		400*(1/2) USD
		Sales Revenue		$200
		Cost of goods sold	$300
		Earth Moving Equipment		$300
	Dec,31,2018	Foreign Currency Transaction Loss	$100		At 4 A$=1 USAD Rate,A$400=USD400*(1/4)
		Accounts Receivable		$100	Loss =USD200-USD (400/4)=USD100
	Feb1,2019	Cash	$400		Cash Received =400*(1USD/A$)
		Foreign Currency Transaction Gain		$300	Gain =(400-100)USD=$300
		Accounts Receivable		$100
		NET INCOME IN 2018
	A	Sales Revenue	$200
	B	Cost of goods sold	$300
	C	Foreign Currency Transaction Loss	$100
	D=A-B-C	Net Income	($200)
		NET INCOME IN 2019
		Foreign Currency Transaction Gain	$300