Mint Corporation has several transactions with foreign entities. Each transaction is denominated in the local currency unit of the country in which the foreign entity is located. On October 1, 20X8, Mint purchased confectionary items from a foreign company at a price of LCU 5,000 when the direct exchange rate was 1 LCU = $1.20. The account has not been settled as of December 31, 20X8, when the exchange rate has decreased to 1 LCU = $1.10. The foreign exchange gain or loss on Mint's records at year-end for this transaction will be: $500 loss $500 gain $378 gain $5,500 loss
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Mint Corporation has several transactions with foreign entities. Each transaction is denominated in the local currency unit of the country in which the foreign entity is located. On October 1, 20X8, Mint purchased confectionary items from a foreign company at a price of LCU 5,000 when the direct exchange rate was 1 LCU = $1.20. The account has not been settled as of December 31, 20X8, when the exchange rate has decreased to 1 LCU = $1.10. The foreign exchange gain or loss on Mint's records at year-end for this transaction will be:
$500 loss
$500 gain
$378 gain
$5,500 loss
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- KA. Mint Corporation has several transactions with foreign entities. Each transaction is denominated in the local currency unit (LCU) of the country in which the foreign entity is located. On November 2, 20X8, Mint purchased confectionary items on account from a foreign company at a price of LCU 23,000 when the direct exchange rate was 1 LCU = $1.08. The account has not been settled as of December 31, 20X8, (Mint’s accounting year end) when the exchange rate has increased to 1 LCU = $1.10. On January 29, 20X9 the account was settled with Mint’s payment of LCU 23,000 when the exchange rate decreased to 1 LCU = $1.07 Required: Record all journal entries for the 1) Transaction date, 2) Yearend adjusting entry, and 3) Settlement date.On May 1, 20X1, Aero Electric Corporation, a U.S. company, purchased goods from Neon Circuit Corporation, a British company, on account for £55,000. Aero Electric entered into a 180-day forward exchange contract to offset its exposed foreign currency liability. On the purchase date, the spot rate was $1.57 per British pound and the forward exchange rate was $1.62 per pound. Which of the following are true of the journal entry recorded for the forward contract on Aero Electric's books? (Select all that apply) Group of answer choices Debit Foreign Currency Receivable from Exchange Broker (£) for $89,100. Credit Dollars Payable to Exchange Broker ($) for $86,350. Credit Dollars Payable to Exchange Broker ($) for $89,100. Debit Foreign Currency Receivable from Exchange Broker (£) for $86,350.Harris Incorporated had the following transactions: On May 1, Harris purchased parts from a Japanese company for a U.S. dollar–equivalent value of $7,000 to be paid on June 20. The exchange rates were May 1 1 yen = $0.0070 June 20 1 yen = 0.0075 On July 1, Harris sold products to a Brazilian customer for a U.S. dollar equivalent of $10,400, to be received on August 10. Brazil’s local currency unit is the real. The exchange rates were July 1 1 real = $0.20 August 10 1 real = 0.22 Required: Assume that the two transactions are denominated in U.S. dollars. Prepare the entries required for the dates of the transactions and their settlement in U.S. dollars. Assume that the two transactions are denominated in the applicable LCUs of the foreign entities. Prepare the entries required for the dates of the transactions and their settlement in the LCUs of the Japanese company (yen) and the Brazilian customer (real).
- On December 5, 20X8, Texas based Imperial Corporation purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January 10, 20X9. The transaction is denominated in Saudi riyals. Imperial's fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are: December 5, 20X8 1 riyal = $ 0.265 December 31, 20X8 1 riyal = 0.262 January 10, 20X9 1 riyal = 0.264 Based on the preceding information, what journal entry would Imperial make on January 10, 20X9, to revalue foreign currency payable to equivalent U.S. dollar value?A. Accounts Payable (SAR) 300 Foreign Currency Transaction Gain 300 B. Accounts Payable (SAR) 100 Foreign Currency Transaction Gain 100 C. Foreign Currency Transaction Loss 100 Accounts Payable (SAR) 100D. Foreign Currency Transaction Loss 200 Accounts Payable (SAR) 200On November 20, 20X5, Diamond Corporation, a calendar-year US corporation, had merchandise delivered from a vendor in France. The invoice was for 350,000 euro and was due January 20, 20X6. On December 13, 20X5, Diamond’s British division sold the merchandise and issued the customer an invoice for 400,000 pounds due February 13, 20X6. Both invoices were paid on their due date. Exchange rates were as follows: Date Euro British Pound November 20, 20X5 $1.1698 $1.6356 December 13, 20X5 1.1713 1.6317 December 31, 20X5 1.1684 1.6286 January 20, 20X6 1.1665 1.6334 February 13, 20X6 1.1652 1.6293 Record all journal entries related to the purchase and sales transactions in Diamond Corporation’s books on the following dates. Be sure to identify floating amounts with the proper foreign currency (i.e., €/euro or £/pound) for full credit. Hint - there are 6 journal entries. The journal entry dates are as follows: November 20, 20X5,…On November 20, 20X5, Diamond Corporation, a calendar-year US corporation, had merchandise delivered from a vendor in France. The invoice was for 350,000 euro and was due January 20, 20X6. On December 13, 20X5, Diamond’s British division sold the merchandise and issued the customer an invoice for 400,000 pounds due February 13, 20X6. Both invoices were paid on their due date. Exchange rates were as follows: Date Euro British Pound November 20, 20X5 $1.1698 $1.6356 December 13, 20X5 1.1713 1.6317 December 31, 20X5 1.1684 1.6286 January 20, 20X6 1.1665 1.6334 February 13, 20X6 1.1652 1.6293 Determine the net exchange gain/(loss) from the above purchase and sale transactions to be included in Diamond’s Income Statement for 20X5 and 20X6. Identify whether it is a gain or loss. 20X5 Income Statement 20X6 Income Statement
- ABC Corp. imported a machine from the US for $50,000 on October 10, 20x1. A letter of credit was opened with a local bank based on the commercial invoice for $50,000, on which ABC Corp. made a 100% deposit cover based on the exchange rate of $1 to P27.50. Shipment of the machine was effected on December 3, 20x1, at which time the exporter collected the proceeds of the letter of credit when the prevailing exchange rate was $1 to P28.00. From the exchange rate fluctuation, ABC Corp. realized how much gain or loss or no gain, no loss? AU Co. acquired a fixed asset for $36,000 on November 1, 20x1 when the exchange rate was $1 = P23.00. At December 31, 20x1, the entity's year-end, the supplier of the fixed asset has not been paid and the exchange rate at that time was $1 = P25.00. On the December 31, 20x1 statement of financial position, what will be the values for the fixed asset and the creditor who was unpaid? On January 1, 20x6, the Riza Co. purchased equipment for P300,000. The…HH Inc. had the following transactions:• On May 1, HH purchased parts from a foreign company (FC1) for a Philippine pesoequivalent value of P8,400 to be paid on June 20. The exchange rates were:• On July 1, HH sold products to a foreign customer for a Philippine peso equivalent ofP10,000 to be received on August 10. Foreign company’s local currency units is the FC2. The exchange rates were:May 1 1 FC1 = P0.0070June 20 1 FC1 = P0.0075July 1 1 FC2 = P0.20August 10 1 FC2 = P0.22REQUIRED:1. Assume that the two transactions are denominated in pesos. Prepare the entriesrequired for the dates of the transactions and their settlement in pesos.2. Assume that the two transactions are D nominated in the applicable local currencyunits of the foreign entities. Prepare the interest required for the dates of thetransactions and their settlement in the local currency units of the foreign company(FC1) and foreign customer (FC2).Tara Corporation issued a promissory note denominated in foreign currency for the purchase made from a supplierin England on December 1, for a 60-day, 12% promissory note for 100,000 pounds, at a selling rate of 1FC to P65.50. OnDecember 31, the selling spot rate is 1FC to P64.80. On January 30, the selling spot rate is 1FC to P65.45On the settlement date, how much is the foreign exchange loss?
- A U.S. company sells a product to a British company with the transaction listed in British pounds. On the date of the sale, the transaction total of $14,500 is billed as £10,000, reflecting an exchange rate of 1.45 (that is, $1.45 per pound). Prepare the entry to record (1) the sale and (2) the receipt of payment in pounds when the exchange rate is 1.35.Iberico plc, a Spanish firm whose functional currency is EUR, sold goods to a British customer for 10,000 GBP on credit. The exchange rate on the date of sale was 1 GBP = 1.2 EUR. Which the journal entry shall Iberico plc prepare regarding the sale? a. DR Cash 12,000 EUR, CR Sale 12,000 EUR b. DR Receivable 10,000 GBP, CR Sale 10,000 GBP c. DR Cash 10,000 GBP, CR Sale 10,000 GBP d. DR Receivable 12,000 EUR, CR Sale 12,000 EURLocal Corp imported a heavy machine from the US for US$50,000 on October 10, 2019. A letter of credit was opened with a Makati branch based on the commercial invoice for US$50,000, on which Local Corpl made a 100% deposit cover based on the exchange rate of $1.00 to P27.50. Shipment of the heavy machine was effected on December 30, 2019, at which time the exporter collected the proceeds of the letter of credit when the prevailing exchange rate was $1.00 to P28.00. From the exchange rate fluctuation, Local Corp realized: Group of answer choices A. P25,000 gain B.P25,000 loss C. P5,000 gain D. No gain, No loss