Question

In: Accounting

On December 1, year1, Pop Copration( U.S company)sold inventory to Java A.M. inc. on credit. ?Java...

On December 1, year1, Pop Copration( U.S company)sold inventory to Java A.M. inc. on credit.
?Java A.M will pay Pop corp. 10,000 eruos in 90days. Pop Corp has a December 31 year-end.

The following rates are known:
?December 1 spot rate:    1USD=1.24 euros
?December 1, 90 day forward rat: 1 USD=1.4 euros
?December 31, spot rate: 1 USD= 1.20 euros
?December 31, 60-day forward rate: 1 USU=1.3 euros

?Prepare Sony Coro. jounral entries, December 1, December 31. March 1st.

Please help me. Thanks!

Solutions

Expert Solution

Journal Entries in the books of Pop Corporation

Date Particulars Debit ($) Credit ($)
December1 Java A.M.inc. 7142.85
To Sales 7142.85

( Being inventory sold booked in the books of Pop Corp in USD. On Dec 1 1USD = 1.24 euros, Thus 10,000 euros = 7142.85 USD ( 10,000/1.24 ) )

Suppose Pop Corporation receives 30,000 euros on December 1 , 30,000 euros on December 31 and 10,000 euros on March 1st then entries will be :

Date Particulars Debit ($) Credit ($)
December 1 Bank/Cash 24,193.54
To Java A.M. inc. 24,193.54

( Being amount paid by Java A.M.inc. On December 1 1USD = 1.24 euros, thus 30,000 euros = 24,193.54 USD ( 30,000/1.24 ) )

Date Particulars Debit ($) Credit ($)
December 31 Bank/Cash 25,000
To Java A.M. inc. 25,000

( Being amount paid by Java A.M.inc. On December 31 1USD = 1.20 euros, thus 30,000 euros = 25,000 USD ( 30,000/1.20 ) )

Date Particulars Debit ($) Credit ($)
March 1 Bank/Cash 7,692.30
To Java A.M. inc. 7,692.30

( Being amount paid by Java A.M.inc. On March 1 1USD = 1.3 euros, thus 10,000 euros = 7,692.30 USD ( 10,000/1.3 ) )

Note : Journal entry of March 1 will not be entered in Year 1 since Pop Corporation is following calander year that is January 1 to December 31 . Hence this entry should not effect the year 1 balances.


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