(a)
Introduction:Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.Gain or loss arise due to sale or purchase of goods and services in a foreign currency is known as foreign currency transaction gain or loss.
The
(b)
Introduction:Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.Gain or loss arise due to sale or purchase of goods and services in a foreign currency is known as foreign currency transaction gain or loss.
Net gain on foreign currency transaction to be shown in income statement of M company as on December 31, 20X5.
Want to see the full answer?
Check out a sample textbook solutionChapter 11 Solutions
Advanced Financial Accounting
- During December of the current year, Exide company based in America, entered into the following transactions; Dec 10 Sold machinery to company located in Colombia for 6,500,000 pesos. On this date, the spot rate was 365 pesos per U.S. Dollar. Dec 12 Purchased Machine parts from a company domiciled in Japan. The contract was denominated in 600,000 Japan yen. The direct exchange spot rate on this date was $.0392. Required: Prepare journal entries to record the transactions above on the books of Exide company. The company uses a periodic inventory system. Prepare journal entries necessary to adjust the accounts as of December 31. Assume that on December 31 the direct exchange rates were as follows: Colombia peso $.00265 Japan yen .0353 Prepare journal entries to record settlement of both open accounts on January 10. Assume that the direct exchange rates on the settlement dates were as follows:…arrow_forwardA 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.arrow_forwardOn 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,…arrow_forward
- 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 Statementarrow_forwardOn 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) 200arrow_forwardHarris 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).arrow_forward
- The U.S. Company purchased Laptop from a company domiciles in japan. The contract was denominated in 600,000 Japan Yen. The direct exchange spot rate on this date was $0.0844. Select one:a. Purchases $650,000Cash $650,000b. None of the other pointsc. Purchases $50,640Account Payable $50,640d. Purchases $650,000Account Payable $650,000arrow_forwardPeerless Corporation (a U.S. company) made a sale to a foreign customer on September 15, for 100,000 crowns. It received payment on October 15. The following exchange rates for 1 crown apply:Prepare all journal entries for Peerless in connection with this sale, assuming that the company closes its books on September 30 to prepare interim financial statements.arrow_forwardOn November 29, 20x1, ABC Co. received a non-cancellable sale order for the exportation of inventories from a UK-based company. 68 The contract price is £40,000 (pound sterling). The contract term is FOB shipping point. The inventories were shipped on December 1, 20x1. The sale was settled on January 3, 20x2. The following are the exchange rates: November 29, 20x1 – ₱67:£1; December 1, 20x1 – ₱68:£1; December 31, 20x1 – ₱70:£1; January 3, 20x2 – ₱71:£1. How much sale revenue is recognized in 20x1?* a. P 2,840,000 b. P 2,720,000 c. P 2,680,000 d. P 2,800,000 pls. answer it asap thank you:)arrow_forward
- On December 1, 20X1, Rone Imports, a U.S. company, purchased clocks from Switzerland for 15,000 francs (SFr) to be paid on January 15, 20X2. Rone’s fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are December 1, 20X1 1 SFr = $0.70 December 31, 20X1 1 SFr = 0.66 January 15, 20X2 1 SFr = 0.68 Required: In which currency is the transaction denominated? Prepare journal entries for Rone to record the purchase, the adjustment on December 31, and the settlemenarrow_forwardMAKATI Exports Corp sold metal crafts to a US firm for $70,000 and pertinent information on exchange conversion rates related to this trasnaction were as follows: Conversion Rate (Peso to US) Nov 04 Receipt of order P27.40 Nov 22 Date of shipment 27.50 Dec 31 Balance sheet date 27.60 Jan 06 Date of collection 27.00 The sale would be appropriately recorded at A. 1,890,000 B. 1,925,000 C. 1,918,000 D. 1,925,000arrow_forwardSelco, a U.S. Company, imports and exports tools, shop equipment, and industrial construction supplies. The company uses a periodic inventory system. During April the company entered into the following transactions. All rate quotations are direct exchange rates. April 3 Purchased power tools from a wholesaler in Japan, on account, at an invoice cost of 1,710,000 yen. On this date the exchange rate for the yen was $0.0076. 5 Sold hand tools on credit that were manufactured in the U.S. to a retail outlet located in West Germany. The invoice price was $3,300. The exchange rate for marks was $0.5962. 9 Sold electric drills on account to a retailer in New Zealand. The invoice price was 16,700 U.S. dollars and the exchange rate for the New Zealand dollar was $0.5891. 11 Purchased drill bits on account from a manufacturer located in Belgium. The billing was for 801,282 francs. The exchange rate for francs was $0.0312. 16 Paid 1,010,000 yen on account to the…arrow_forward