Question

Merchant Company had the following foreign currency transactions: 1. On November 1, 20X6, Merchant sold goods to a company located in Munich, Germany. The receivable was to be settled in European euros on February 1, 20X7, with the receipt of 230,000 by Merchant Company. 2. On November 1, 20x6, Merchant purchased machine parts from a company located in Berlin, Germany. Merchant is to pay 115,000 on February 1, 20X7 The direct exchange rates are as follows: November 1, 20x6 December 31, 20x6 February 1, 20x7 l- 0.60 1 0.62 1 0.58 Required: Record the T-accounts for the following transactions (Record the transactions in the given order.) . The November 1, 20X6, export transaction (sale). 2. The November 1, 20X6, import transaction (purchase). 3. The December 31, 20X6, year-end adjustment required of the foreign currency-denominated receivable of 230,000. 4. The December 31, 20X6, year-end adjustment required of the foreign currency-denominated payable of 115,000. 5. The February 1, 20X7, adjusting entry to determine the U.S. dollar-equivalent value of the foreign currency receivable on that date. 6. The February 1, 20X7, adjusting entry to determine the U.S. dollar-equivalent value of the foreign currency payable on that date 7. The February 1, 20X7, settlement of the foreign currency receivable. 8. The February 1, 20X7, settlement of the foreign currency payable.

Answer 1

Foreign Currency Units ( Particulars Account Payabe ( Particulars Date Debit Credit Date Debit Credit Sale of goods Purchase of goods 230,000 Nov 1,2016 Purchase of goods 115,000 115,000 Bal 12/31/X6 Balance c/f 115,000 115,000 Bal 2/2/X7 Balance c/f Total 115,000 230,000 115,000 115,000 Bal 1/1/x7 Balance b Feb 1,2017 Payment on purcahse of goods Total 230,000 115,000 Total 115,000 115,000 Account Receivable ( Particulars Foreign Currency Transaction Loss Date Debit Credit Date Particulars Debit Credit Nov 1,2016 Sale of goods 230,000 12/31/X6 FC loss on receivables $ 12,365.59 (230K/0.60 230K/0.62 Bal 12/31/X6 Balance c/f Bal 12/31/X6 Balance 230,000 230,000 $12,365.59 12,365.59 12,365.59 Total 230,000 Total Bal 1/1/X7 Balance b/f Feb 1,2017 Receipt on sale of goods 230,000 02/01/X7 FC loss on Payables 12,791.99 (115K/0.58 - 115K/0.62 230,000 230,000 Total 230,000 Bal 02/01/x7 Balance c/f 12,791.99 12,791.99 Total 12,791.99 Foreign Currency Transaction Gain Date Particulars Debit Credit 12/31/X6 FC gain on Payables Bal 12/31/X6 Balance 02/01/X7 FC Gain on Receivables Bal 02/01/x7 Balance $ 6,182.80 (115K/0.60 115K/0.62 $6,182.80 6,182.80 6,182.80 25,583.98 Total (230K/0.58- 230K/0.62 c/f 25,583.98 25,583.98 Total 25,583.98