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    Forex Problem

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    JAMES SANGARIOS
    Creed Co. sold merchandise to a foreign entity for 250,000 francs on September 1, 2020. The terms required payment on February 1, 2021. Exchange rates changed between the sale date, year-end, and payment date, resulting in foreign exchange gains and losses. Journal entries were provided to record the transaction in 2020 and 2021. Lemon Co. ordered merchandise from a foreign entity on November 15, 2020. The goods were shipped on December 10, 2020 and paid for on January 10, 2021. Exchange rates fluctuated over this period. Journal entries were provided to record the transaction in 2020 and 2021.

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    Forex Problem

    Uploaded by

    JAMES SANGARIOS
    245 views3 pages
    Creed Co. sold merchandise to a foreign entity for 250,000 francs on September 1, 2020. The terms required payment on February 1, 2021. Exchange rates changed between the sale date, year-end, and payment date, resulting in foreign exchange gains and losses. Journal entries were provided to record the transaction in 2020 and 2021. Lemon Co. ordered merchandise from a foreign entity on November 15, 2020. The goods were shipped on December 10, 2020 and paid for on January 10, 2021. Exchange rates fluctuated over this period. Journal entries were provided to record the transaction in 2020 and 2021.

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    Acctg. 9 Problems

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    forex-problem

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    Creed Co. sold merchandise to a foreign entity for 250,000 francs on September 1, 2020. The terms required payment on February 1, 2021. Exchange rates changed between the sale date, year-end, and payment date, resulting in foreign exchange gains and losses. Journal entries were provided to record the transaction in 2020 and 2021. Lemon Co. ordered merchandise from a foreign entity on November 15, 2020. The goods were shipped on December 10, 2020 and paid for on January 10, 2021. Exchange rates fluctuated over this period. Journal entries were provided to record the transaction in 2020 and 2021.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    245 views3 pages

    Forex Problem

    Uploaded by

    JAMES SANGARIOS
    Creed Co. sold merchandise to a foreign entity for 250,000 francs on September 1, 2020. The terms required payment on February 1, 2021. Exchange rates changed between the sale date, year-end, and payment date, resulting in foreign exchange gains and losses. Journal entries were provided to record the transaction in 2020 and 2021. Lemon Co. ordered merchandise from a foreign entity on November 15, 2020. The goods were shipped on December 10, 2020 and paid for on January 10, 2021. Exchange rates fluctuated over this period. Journal entries were provided to record the transaction in 2020 and 2021.

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    © All Rights Reserved
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    PROBLEM

    1. On September 1, 2020, Creed Co. sold merchandise to a foreign entity for 250,000 francs. Terms
    of the sale require payment in francs on February 1, 2021. On September 1, 2020, the spot
    exchange rate was P1.2 per franc. At December 31, 2020 the spot rate was P1.19, but the rate
    increased to P1.22 by February 1, 2021 when payment was received.

    Required: Provide journal entries in 2020 and 2021.

    9/1/2020 Accounts receivable 300,000


    Sales 300,000

    12/31/2020 Foreign exchange loss 2,500


    Accounts receivable 2,500

    02/01/2021 Cash(250,000 xP1.22) 305,000


    Accounts receivable 297,500
    Foreign exchange gain 7,500

    2. On November 15, 2020 Lemon Co. ordered merchandise on an FOB shipping point term, from a
    foreign entity for 200,000 marks. The merchandise was shipped and invoiced to Lemon on
    December 10, 2020. Lemon paid the invoice on January 10, 2021. The spot rates are as follows:

    Nov. 15, 2020 P22.4955


    December 10, 2020 P22.4875
    December 31, 2020 P22.4675
    January 10, 2021 P22.4475

    Required: Provide journal entries in 2020 and 2021.

    12/10/2020 Purchases 4,497,500


    Accounts payable 4,497,500

    12/31/2020 Accounts payable 4,000


    Foreign exchange gain 4,000

    01/10/2021 Accounts payable 4,493,500


    Cash(200,000xP22.4475) 4,489,500
    Foreign exchange gain 4,000
    SAMPLE PROBLEM
    1. On November 29, 2022, ABC Co. placed a non-cancellable purchase order with a company
    based in the US to import a machine for $10,000. The contract term is FOB shipping point. The
    machine was shipped on December 1, 2022 and was received by ABC on December 15, 2022.
    The purchase price was settled on January 3, 2023.

    The following are the exchange rates per $1.

    November 29, 2022 P55


    December 1, 2022 58
    December 15, 2022 57
    December 31, 2022 60
    January 3, 2023 61

    Required: Provide the journal entries.

    12/1/2022 Purchases 580,000


    Accounts Payable 580,000

    12/31/2022 Forex loss 20,000


    Accounts Payable 20,000

    1/3/2023 Accounts Payable 600,000


    Forex loss 10,000
    Cash 610,000

    2. On September 1, 2022, Creed Co. sold merchandise to a foreign entity for 250,000 francs.
    Terms of the sale require payment in francs on February 1, 2023. On September 1, 2022, the
    spot exchange rate was P1.2 per franc. At December 31, 2022 the spot rate was P1.19, but the
    rate increased to P1.22 by February 1, 2023 when payment was received.

    Required: Provide journal entries in 2022 and 2023.

    8/1/2022 Accounts Receivable 300,000


    Sales 300,000

    12/31/2022 Forex loss 2,500


    Accounts Receivable 2,500

    2/1/2023 Cash 305,000


    Accounts Receivable 297,500
    Forex gain 7,500

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