M Company has the following export and import transactions during 20X5:
Required:
a. Prepare journal entries to record M’s import and export transactions during 20X5 and 20X6.
b. What amount of foreign currency transaction gain or loss would M report on its income statement for 20X5?
Part II:
Assume that M used forward currency contracts to manage the foreign currency risks of all of its export and import transactions during 20X5.
Required:
a. Prepare the journal entries required to record M’s foreign currency activities during 20X5 and 20X6.
b. What amount of foreign currency transaction gain or loss would M report on its income statement for 20X5 if Parts I and II of this problem were combined?
c. What amount of foreign currency transaction gain or loss would M report on its income statement for 20X6 if Parts I and II of this problem were combined?
No |
Date |
General Journal |
Debit |
Credit |
|
1 |
Mar. 1, 20X5 |
Dollars receivable from exchange broker |
|
30,080 |
|
Foreign currency payable to exchange broker (C$) |
|
30,080 |
|||
2 |
May. 30, 20X5 |
Foreign currency transaction loss |
|
1,880 |
|
Foreign currency payable to exchange broker (C$) |
|
1,880 |
|||
3 |
May. 30, 20X5 |
Foreign currency payable to exchange broker (C$) |
|
31,960 |
|
Foreign currency units (C$) |
|
31,960 |
|||
4 |
May. 30, 20X5 |
Cash |
|
30,080 |
|
Dollars receivable from exchange broker |
|
30,080 |
No |
Date |
General Journal |
Debit |
Credit |
|
1 |
Jul. 1, 20X5 |
Foreign currency receivable from exchange broker (¥) |
|
44,100 |
|
Dollars payable to exchange broker |
|
44,100 |
|||
2 |
Aug. 30, 20X5 |
Foreign currency receivable from exchange broker (¥) |
|
210 |
|
Foreign currency transaction gain |
|
210 |
|||
3 |
Aug. 30, 20X5 |
Foreign currency transaction loss |
|
210 |
|
Firm commitment |
|
210 |
|||
4 |
Aug. 30, 20X5 |
Equipment |
|
43,470 |
|
Firm commitment |
|
210 |
|||
Accounts payable (¥) |
|
43,680 |
|||
5 |
Oct. 29, 20X5 |
Foreign currency receivable from exchange broker (¥) |
|
210 |
|
Foreign currency transaction gain |
|
210 |
|||
6 |
Oct. 29, 20X5 |
Dollars payable to exchange broker |
|
44,100 |
|
Cash |
|
44,100 |
|||
7 |
Oct. 29, 20X5 |
Foreign currency units (¥) |
|
44,520 |
|
Foreign currency receivable from exchange broker (¥) |
|
44,520 |
No |
Date |
General Journal |
Debit |
Credit |
|
1 |
Nov. 16, 20X5 |
Foreign currency receivable from exchange broker (£) |
|
45,090 |
|
Dollars payable to exchange broker |
|
45,090 |
|||
2 |
Dec. 31, 20X5 |
Foreign currency transaction loss |
|
675 |
|
Foreign currency receivable from exchange broker (£) |
|
675 |
|||
3 |
Jan. 15, 20X6 |
Foreign currency transaction loss |
|
135 |
|
Foreign currency receivable from exchange broker (£) |
|
135 |
|||
4 |
Jan. 15, 20X6 |
Dollars payable to exchange broker |
|
45,090 |
|
Cash |
|
45,090 |
|||
5 |
Jan. 15, 20X6 |
Foreign currency units (£) |
|
44,280 |
|
Foreign currency receivable from exchange broker (£) |
|
44,280 |
b. What amount of foreign currency transaction gain or loss would M report on its income statement for 20X5 if Parts I and II of this problem were combined?
Foreign currency transaction |
net loss |
of |
$ 1,235 |
c. What amount of foreign currency transaction gain or loss would M report on its income statement for 20X6 if Parts I and II of this problem were combined?
Foreign currency transaction |
net loss |
of |
$ 405 |
M Company has the following export and import transactions during 20X5: On March 1, M sold...
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