Advanced Accounting
7th Edition
ISBN: 9781119373209
Author: JETER, Paul K. Chaney
Publisher: WILEY
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Chapter 12, Problem 1E
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Selco, 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.
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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.
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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.
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A company located in the USA, which has the dollar as its functional currency, purchased inventory on February 1 in Vietnam for 10,000,000 dongs with a payment date of April 1. One dong can be exchanged for $0.01 on February 1, and one dong can be exchanged for $0.12 on April 1. On April 1, the company pays off the 10,000,000-dong debt from the purchase of inventory. When the US company presents its financial statements, which of the following statements is false?
The business should file with the statement a gross profit of $110,000.
No profit is recognized related to inventory
A loss of $20,000 is reported as a result of accounts payable
Cost of goods sold is reported at $120,000
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
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,…
Chapter 12 Solutions
Advanced Accounting
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