Question

5) During December of the current year, Exide company based in America, entered into the following transactions; Dec 10 Sold machinery to company located in Colombia for 6,500,000 pesos. On this date, the spot rate was 365 pesos per U.S. Dollar. Dec 12 Purchased Machine parts from a company domiciled in Japan. The contract was denominated in 600,000 Japan yen. The direct exchange spot rate on this date was $.0392. Required: A) Prepare journal entries to record the transactions above on the books of Exide company. The company uses a periodic inventory system. B) Prepare journal entries necessary to adjust the accounts as of December 31. Assume that on December 31 the direct exchange rates were as follows: Colombia peso $.00265 Japan yen .0353 C) Prepare journal entries to record settlement of both open accounts on January 10. Assume that the direct exchange rates on the settlement dates were as follows: Colombia peso $.00325 Japan yen .0396

6) The following information is available for Jet Company Ltd for 2018. a) On January 1, 2018 Jet paid property tax amounting OMR 100,000 on its rented building for the calendar year 2018. Month of July Jet Company purchased end of the year new Office building amounting to OMR 50,000. Tax paid two equal terms. b) The repairs and Maintenance of property amounting to OMR 10,000. c) A Stock gain of OMR 200,000 from high marketable demand in the month of September 1 and Dec 15 in the year of 2018. d) At the end of the August 2018 Jet Company sold some equipment with a fair value of OMR 50,000 for OMR 40,000. Required: State the OMR amounts that should appear in Jet Company’s Quarterly financial statement report.

Answer 1

Answer 5:

Since the company is in the business of manufacturing and selling machines, the purchase of machine parts is to be treated as normal purchases and sales of machinery is to be treated as normal sales.

Hence the accounting will be done as follows: (Columns on the right side for currency is for easy understanding)

Date	Particulars		LF	Debit Amount ($)	Credit Amount ($)		Currency	Currency Amount	Rate
10.Dec	Debtors	Dr		17,808.22			Peso	6500000	365 peso/usd
	Sales	Cr			17,808.22
12.Dec	Purchases	Dr		23,520.00
	Creditors	Cr			23,520.00		Yen	600000	1 yen = $.0392
31.Dec	Foreign Exchange loss	Dr		583.22
	Debtors	Cr			583.22		Peso	6500000	1 peso = $.00265
	(6500000*0.00265 - 17808.22)
31.Dec	Creditors	Dr		2340			Yen	600000	1 yen = $.0353
	Foreign Exchange Gain	Cr			2340
	(600000*0.0353 - 23520)
10.Jan	Bank	Dr		21125			Peso	6500000	1 peso = $.00325
	Debtors (6500000*0.00265)	Cr			17225
	Foreign Exchange Gain	Cr			3900
	(6500000*0.00325 - 6500000*0.00265)
10.Jan	Creditors (600000*0.0353)	Dr		21180
	Foreign Exchange loss (Diff)	Dr		2580
	Bank (600000*0.0396)	Cr			23760		Yen	600000	1 yen = $.0396

Answer 6

The journal entries would be as follows (assuming property acquired mid year had taxes of 50,000, paid for 1 year, since the statement is not clear if 50,000 is cost of property or tax paid on property)

Date	Particulars		LF	Debit Amount (OMR)	Credit Amount (OMR)
01.Jan.18	Property Tax	Dr		100000
	Bank	Cr			100000
01.Jul.18	Property Rax	Dr		25000
	Prepaid Property Tax	Dr		25000
	Bank	Cr			50000
01.Jul.18	Repairs and Maintenance	Dr		10000
	Bank	Cr			10000
31.Dec.18	Bank	Dr		200000
	Stock Gain	Cr			200000
31.Dec.18	Bank	Dr		40000
	Loss on Sale of Equipment	Dr		10000
	Equipments	Cr			50000

The Trial balance for the year would be as follows:

Sl	Account	Debit Amount	Credit Amount
1	Property Tax	125000
2	Prepaid Property Tax	25000
3	Bank	80000
4	Repairs and Maintenance	10000
5	Stock Gain		200000
6	Equipments		50000
7	Loss on Sale of Equipment	10000
		250000	250000

Statement of Accounts would be as follows:

Particulars	Amount	Amount
Revenue
Stock Gain		200000
Expenses
Property Tax	125000
Repairs and Maintenance	10000
Loss on Sale of Equipment	10000
		145000
Net Profit		55000