Question

Leigh of New York sells its products to customers in the United States and the United Kingdom. On December 16, 2019, Leigh sold merchandise on credit to Bronson Ltd. of London at a price of 32,000 pounds. The exchange rate on that day for £1 was $2.0434. On December 31, 2019, when Leigh prepared its financial statements, the rate was £1 for $2.0373. Bronson paid its bill in full on January 15, 2020, at which time the exchange rate was £1 for $2.0393. Leigh immediately exchanged the 32,000 pounds for U.S. dollars.

Prepare Leigh’s journal entries on December 16, December 31, and January 15. (Do not round intermediate calculations.)

Answer 1

Date	Account Titles and Explanation	Debit	Credit
December 16	Accounts receivable	65388.80
	Sales revenue (£32000 x 2.0434)		65388.80
	(To record the sale)
December 31	Foreign exchange loss*	195.20
	Accounts receivable		195.20
	(To record the exchange loss on translation)
January 15	Cash (£32000 x 2.0393)	65257.60
	Foreign exchange gain**		64.00
	Accounts receivable		65193.60
	(To record collection on account)

*Foreign exchange loss = $65388.80 - (£32000 x 2.0373) = $65388.80 - $65193.60 = $195.20

**Foreign exchange gain = (£32000 x 2.0393) - $65193.60 = $65257.60 - $65193.60 = $64