Question

oltac Corporation (a U.S. company located in Charlotte, North Carolina) has the following import/export transactions denominated in Mexican pesos in 2017:

March 1	Bought inventory costing 114,000 pesos on credit.
May 1	Sold 70 percent of the inventory for 94,000 pesos on credit.
August 1	Collected 77,000 pesos from customers.
September 1	Paid 67,000 pesos to suppliers.

Currency exchange rates for 1 peso for 2017 are as follows:

March 1	$	0.23
May 1		0.24
August 1		0.25
September 1		0.26
December 31		0.27

Assume that all receipts were converted into dollars as soon as they were received.

For each of the following accounts, how much will Voltac report on its 2017 financial statements?

	a Inventory b Cost of goods sold c Sales d Accounts receivable e Accounts payable f Cash

Answer 1

	Journal entry	Nature	Debit amount	Credit amount
March 1	Purchases A/c	Debit	$                                                 26,220		114000*0.23
	Creditors A/c	Credit		$                                                    26,220
May 1	Debtors A/c	Debit	$                                                 22,560		94000*0.24
	Sales A/c	Credit		$                                                    22,560
August 1	Cash A/c	Debit	$                                                 19,250		77000*0.25
	Debtors A/c	Credit		$                                                    18,480	77000*0.24
	Foreign exchange gain	Credit		$                                                          770	77000*(0.25-0.24)
September 1	Creditors A/c	Debit	$                                                 15,410		67000*0.23
	Foreign exchange loss	Debit	$                                                   2,010		67000*(0.26-0.23)
	Cash A/c	Credit		$                                                    17,420	67000*0.26
(d) & (e )
	Balance in Pesos	working	Exchange rate as on 31st december	Exchange rate as on transaction date	Exchange gain / (loss) per Pessos	Net gain/(Loss)	Balance as at 31st december
Debtors	17,000	94000-77000	0.27	0.24	0.03	$                 510	$                                       4,590	17000*0.27
Creditors	47,000	114000-67000	0.27	0.23	-0.04	$           (1,880)	$                                    12,690	47000*0.27
(f)
Cash		$                    1,830
August 1	$                        19,250
September 1	$                       (17,420)
(b)
Cost of goods sold
May 1	$                        18,354	114000*70%*0.23
(c )
Sales
May 1	$                        22,560
(a )
Inventory	$                          7,866	114000*30%*0.23

Please note all answers has been marked bold

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