In: Accounting
Part I Maple Company had the following export and import transactions during 20X5:
1. On March 1, Maple sold goods to a Canadian company for C$48,000, receivable on May 30. The spot rates for Canadian dollars were C$1 = $0.65 on March 1 and C$1 = $0.68 on May 30.
2. On July 1, Maple signed a contract to purchase equipment from a Japanese company for ¥420,000. The equipment was manufactured in Japan during August and was delivered to Maple on August 30 with payment due in 60 days on October 29. The spot rates for yen were ¥1 = $0.102 on July 1, ¥1 = $0.104 on August 30, and ¥1 = $0.106 on October 29. The 60-day forward exchange rate on August 30, 20X5, was ¥1 = $0.1055.
3. On November 16, Maple purchased inventory from a London company for £28,000, payable on January 15, 20X6. The spot rates for pounds were £1 = $1.65 on November 16, £1 = $1.63 on December 31, and £1 = $1.64 on January 15, 20X6. The forward rate on December 31, 20X5, for a January 15, 20X6, exchange was £1 = $1.645. Required: Prepare journal entries to record Maple’s import and export transactions during 20X5 and 20X6. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.
a.1 Prepare journal entries to record Maple’s import and export transactions during 20X5 and 20X6
Record the sale of goods.
Record the foreign currency transaction gain.
Record the collection of accounts receivable.
Record the cash received
a.2
Record the commitment to purchase the equipment.
Record the purchase of the equipment.
Record the revaluation of the foreign currency.
Record the receipt of foreign currency.
Record the payment of accounts payable.
a.3
ecord the purchase of inventory.
Record the revaluation of the foreign currency.
Record the revaluation of the foreign currency.
Record the receipt of the foreign currency.
Record the payment of accounts payable.
b. |
What amount of foreign currency transaction gain or loss would Maple report on its income statement for 20X5?
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c. |
What amount of foreign currency transaction gain or loss would Maple report on its income statement for 20X6 if Parts I and II of this problem were combined? |
Part 1 | |||
a.1 Prepare journal entries to record Maple’s import and export transactions during 20X5 and 20X6 | |||
Date | Debit | Credit | |
20X5 | |||
Mar.1 | Accounts Receivable (C$) | $31,200.00 | |
Sales | $31,200.00 | ||
Record the sale of goods. (C$48,000 x $.65 spot rate) | |||
May 30 | Accounts Receivable (C$) | $1,440.00 | |
Foreign Currency Transaction Gain | $1,440.00 | ||
Record the foreign currency transaction gain [C$48,000 x ($.68 - .65)] | |||
Foreign Currency Units (C$) | $32,640.00 | ||
Accounts Receivable (C$) | $32,640.00 | ||
Record the collection of accounts receivable (C$48,000 x $.68 Spot Rate) | |||
Cash | $32,640.00 | ||
Foreign Currency Units (C$) | $32,640.00 | ||
Record the cash received | |||
a.2 | |||
July 1 | No entry is recorded when the contract to purchase equipment is signed | ||
Record the commitment to purchase the equipment. | |||
Aug 30 | Equipment | ¥43,680 | |
Accounts Payable (¥) | $43,680.00 | ||
Record the purchase of the equipment.(¥420,000 x $.104) | |||
Oct 29 | Foreign Currency Transaction Loss | ¥840 | |
Accounts Payable (¥) | ¥840 | ||
Record the revaluation of the foreign currency.¥420,000 x ($.106 - $.104) | |||
Foreign Currency Units (¥) | ¥44,520 | ||
Cash | ¥44,520 | ||
Record the receipt of foreign currency. (¥4200,000 x $.106 ) | |||
Accounts Payable (¥) | ¥44,520 | ||
Cash | ¥44,520 | ||
Record the payment of accounts payable. | |||
a.3 | |||
November 16, 20X5 | Inventory | £46,200.00 | |
Accounts Payable (£) | £46,200.00 | ||
Record the purchase of inventory.[£28,000 x $1.65] | |||
Dec.31 | Accounts Payable (£) | £560.00 | |
Foreign Currency Transaction Gain | £560.00 | ||
Record the revaluation of the foreign currency. £28,000 x ($1.63 - $1.65) | |||
Jan.15 20X6 | Foreign Currency Transaction Loss | £280.00 | |
Accounts Payable (£) | £280.00 | ||
Record the revaluation of the foreign currency.(£28,000 x ($1.64 - $1.63) | |||
Foreign Currency Units (£) | £45,920.00 | ||
Cash | £45,920.00 | ||
Record the receipt of foreign currency. (£28,000 x $1.64 ) | |||
Accounts Payable (£) | £45,920.00 | ||
Foreign Currency Units (£) | £45,920.00 | ||
b. | |||
What amount of foreign currency transaction gain or loss would Maple report on its income statement for 20X5? | |||
Foreign currency transaction gain from transaction denominated in pounds | 560.00 | ||
Foreign currency transaction gain from transaction denominated in Canadian dollars | 1440.00 | ||
Less : foreign currency transaction loss from transaction denominated in yen | -840.00 | ||
Foreign currency transaction gain for 20X5 | £1,160.00 |