Global Motors is a U.S. corporation that purchases automobiles from European manufacturers for distribution in the United States. A recent purchase involved the following events: Nov.12 Purchased automobiles from Stockholm Motors in Swedish kronor for Sk20,000,000, payable in 60 days. Current exchange rate, $0.1286 per krona. (Global uses the perpetual inventory system.) Dec.31 Made year-end adjusting entry relating to the Sk20,000,000 account payable to Stockho lm Motors. Current exchange rate, $0.1288 per krona. Jan.11 Issued a check to World Bank for $2,566,800 in full payment of the account payable to Stockholm Motors. Required: a. Prepare in general journal form the entries necessary to record the preceding events.

Global Motors is a U.S. corporation that purchases automobiles from European manufacturers for distribution in the United States. A recent purchase involved the following events: Nov.12 Purchased automobiles from Stockholm Motors in Swedish kronor for Sk20,000,000, payable in 60 days. Current exchange rate, $0.1286 per krona. (Global uses the perpetual inventory system.) Dec.31 Made year-end adjusting entry relating to the Sk20,000,000 account payable to Stockho lm Motors. Current exchange rate, $0.1288 per krona. Jan.11 Issued a check to World Bank for $2,566,800 in full payment of the account payable to Stockholm Motors. Required: a. Prepare in general journal form the entries necessary to record the preceding events.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter25: Taxation Of International Transact Ions

Section: Chapter Questions

Problem 20P

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Global Motors is a U.S. corporation that purchases automobiles from European manufacturers for distribution in the United States. A recent purchase involved the following events: Nov. 12 Purchased automobiles from Stockholm Motors in Swedish kronor for Sk20,000,000, payable in 60 days. Current exchange rate, $0.1286 per krona. (Global uses the perpetual inventory system.) Dec. 31 Made year-end adjusting entry relating to the Sk20,000,000 account payable to Stockholm Motors. Current exchange rate, $0.1288 per krona. Jan. 11 Issued a check to World Bank for $2,566,800 in full payment of the account payable to Stockholm Motors. Required: a. Prepare in general journal form the entries necessary to record the preceding events. b. Compute the exchange rate (price) of the krona in U.S. dollars on January 11.
. Stark, Inc., placed anorder for inventory costing 500,000 FC with a foreign vendor on April 15 when the spot ratewas 1 FC ¼ $0.683. Stark received the goods on May 1 when the spot rate was 1 FC ¼ $0.687.Also on May 1, Stark entered into a 90-day forward contract to purchase 500,000 FC at a forward rate of 1 FC ¼ $0.693. Payment was made to the foreign vendor on August 1 when thespot rate was 1 FC ¼ $0.696. Stark has a June 30 year-end. On that date, the spot rate was1 FC ¼ $0.691, and the forward rate on the contract was 1 FC ¼ $0.695. Changes in thecurrent value of the forward contract are measured as the present value of the changes in theforward rates over time and no separate accounting is given the time value of the contract. Therelevant discount rate is 6%.1. Prepare all relevant journal entries suggested by the above facts assuming that the hedge isdesignated as a fair value hedge.2. Prepare a partial income statement and balance sheet as of the company’s June 30 year-endthat…
Barefoot Co. purchased inventory from Nakasakasaka Co., a foreign supplier, on November 15, 20x1 for Y100,000, when the spot rate was P0.4295. On December 31, 20x1, the spot rate was P0.4245. Barefoot Co. settled the account on January 15, 20x2 when the spot rate was P 0.4345. Requirement: Provide the journal entries in 20x1 and 20x2
Stark, Inc., placed an order for inventory costing 500,000 FC with a foreign vendor on April 15 when the spot rate was 1 FC = $0.683. Stark received the goods on May 1 when the spot rate was 1 FC = $0.687. Also on May 1, Stark entered into a 90-day forward contract to purchase 500,000 FC at a forward rate of 1 FC = $0.693. Payment was made to the foreign vendor on August 1 when the spot rate was 1 FC = $0.696. Stark has a June 30 year-end. On that date, the spot rate was 1 FC = $0.691, and the forward rate on the contract was 1 FC = $0.695. Changes in the current value of the forward contract are measured as the present value of the changes in the forward rates over time and no separate accounting is given the time value of the contract. The relevant discount rate is 6%.1. Prepare all relevant journal entries suggested by the above facts assuming that the hedge is designated as a fair value hedge.2. Prepare a partial income statement and balance sheet as of the company’s June 30…
XYZ, CO., placed an order for inventory costing 9,000,000 Euro with a foreign vendor on May 15 whenthe spot rate was 1 Euro = $1.165. XYZ received the goods on June 1 when the spot rate was 1 Euro =$1.173. Also on June 1, XYZ entered into a 90-day forward contract to purchase 9,000,000 Euro at aforward rate of 1 Euro = $1.182. Payment was made to the foreign vendor on September 1 when thespot rate was 1 Euro= $1.20. XYZ has a June 30 year-end. On that date, the spot rate was 1 Euro =$1.18, and the forward rate on the contract was 1 Euro= $1.187. Changes in the current value of theforward contract is measured as the present value of the changes in the forward rates over time and noseparate accounting is given the time value of the contract. The relevant discount rate is 6%. Prepare all relevant journal entries suggested by the above facts assuming that the hedge is designatedas a fair value hedge.
On September 1, 2016, Bain Corp. recorded a sale of inventory to a foreign customer for 300,000 LCU’s when the US dollar equivalent was $96,000. Bain did not enter into a forward contract. Bain shipped the inventory on October 15, 2016 when the US dollar equivalent was $100,000. Bain received the customer’s remittance in full on November 16, 2016, and sold the 300,000 LCU for $105,000. In its income statement for the year ended December 31, 2016, Bain should report as part of net income a foreign exchange transaction gain of: Select one: a. $0 b. $4,000 c. $5,000 d. $9,000
Carl Inc. purchased inventory on September 12, 2017 from a foreign customer for 750,000 units of foreign currency (FC) due on January 12, 2018. Simultaneously, the company entered into a forward contract for 750,000 units of FC for delivery on January 12, 2018 at the forward rate of $1.03. Payment was made to the foreign customer on January 12, 2018. The company ends its fiscal year on December 31. The following exchange rates were quoted: Forward Rate Date Spot Rate (Delivery on 1/12/2018) 9/12/2017 1.01 1.03 12/31/2017 1.08 1.09 1/12/2018 1.05 Notes: Read carefully and follow strictly so that Bb can grade you correctly!1. Use comma in numbers, one thousand is 1,000, not 1000. Round to the nearest dollar: 1,000.45 should be 1,000, and 1,000.55 should be 1,001, no decimal points. No $ sign.2. If no entry is required, write N/A.3. Only use the following accounts: Inventory, A/P (FC), A/R (FC), Cash, Sales, CGS, Exchange G/L, Fwd Contract,…