Question

Help Save & Exte Check Tex Hardware sells many of its products overseas. The following are some selected transactions. 1. Tex sold electronic subassemblies to a firm in Denmark for 120,000 Danish kroner (Dkr) on June 6, when the exchange rate was Dkr 1 + $0.1715. Collection was made on July 3 when the rate was Dkr 1 - $0.1718 2. On July 22, Tex sold copper fittings to a company in London for £38,000 with payment due on September 20. Also, on July 22. Tex entered into a 60-day forward contract to sell £38,000 at a forward rate of £1 = $1.630. The forward contract is not designated as a hedge. The spot rates follow: July 22 September 20 E1 - $1.580 61 - $1.612 3. Tex sold storage devices to a Canadian firm for C$80,000 (Canadian dollars) on October 11, with payment due on November 10. On October 11, Tex entered into a 30-day forward contract to sell Canadian dollars at a forward rate of C$1 = $0.730. The forward contract is not designated as a hedge. The spot rates were as follows: October 11 November 10 C$1 - $0.735 C$1 = $0.732 Required: Prepare journal entries to record Tex's foreign sales of its products, use of forward contracts, and settlements of the receivables. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 Record the foreign sale and foreign currency receivable. 105 HP Next >

Answer 1

40 Debit Credit 41 Date General Journal 1 06-Jun Accounts Receivable (Dkr) Sales Revenues (120000* 1715) (To record Foreign sale and foreign currency receivable) 42 43 20,580 20,580 44 45 46 36 47 03-Jul Accounts Receivable (Dkr) (120000 * 1718)-(120000* 1715) Foreign Currency Transaction Gain (To record to revalue the foreign currency receivable to the U.S. dollar equivalent value) 36 48 49 50 20,616 51 03-Jul Foreign Currency Units (Dkr) Accounts Receivable (Dkr) (To record to collect the accounts receivable in Danish kroner) 20,616 52 53 2 54 60,040 55 22-Jul Accounts Receivable (E) Sales Revenues (38000*1.580) (To record Foreign sale and foreign currency receivable) 60,040 56 57 58 59 22-Jul Dollar Receivable from Exchange Broker ($) (38000*1.630) 61,940 Foreign currency payable to Exchange Broker (£) 61,940 (To record the entry for the 60-day forward exchange contract signed to sell British pounds.) 60

62 1216 (38000 *1.612-38000*1.580) 63 20-Sep Accounts Receivable (E) Foreign Currency Transaction Gain (To record the entry to revalue the foreign currency receivable.) 1,216 684 (38000 *1.612-38000*1.630) 64 65 66 67 68 69 20-Sep Foreign Currency Payable to Exchange Broker (E) Foreign Currency Transaction Gain (To record the entry to revalue the foreign currency payable.) 684 61,256 70 71 20-Sep Foreign Currency Units (£) Accounts Receivable (E) (To record the receipt of British pounds from the customer.) 61,256 72 73 74 61,256 75 20-Jul Foreign Currency Payable to exchange Broker (E) Foreign Currency Units (£) (To record the pounds delivered to a broker) 61,256 76 77 78 79 20-Sep Cash 61,940 Dollar Receivable from Exchange Broker ($) (38000*1.630) 61,940 (To record receipt of U.S. dollars from the broker in accordance with the forward contract) 80

81 3 82 83 11-Oct Accounts Receivable (C$) 58,800 Sales Revenues (80000*.735) 58,800 (To record the sale to a Canadian firm denominated in Canadian dollars.) (To record to revalue the foreign currency receivable to the U.S. dollar equivalent value) 84 85 86 87 88 11-Oct Dollar Receivable from Exchange Broker ($) (80000*.730) 58,400 Foreign currency payable to exchange Broker (C$) 58,400 (To record the entry for a 60-day forward contract signed to sell Canadian dollars.) 89 90 91 240 10-Nov Foreign Currency Transaction Loss (80000 *.732-80000*.735) Accounts Receivable (C$) 240 (To record the revaluation of the foreign currency receivable to the equivalent U.S. dollar value.) 92 93 94 95 96 160 (80000 *.732 -80000*.730) 10-Nov Foreign Currency Transaction Loss Foreign currency payable to Exchange Broker (C$) (To record the revaluation of the foreign currency payable.) 160 97 98 99 58,560 100 10-Nov Foreign Currency Units (C$) Accounts Receivable (C$) (To record the receipt of Canadian dollars from the customer.) 58,560 101

103 58,560 104 10-Nov Foreign Currency Payable to Exchange Broker (C$) Foreign Currency Units (C$) (To record the the delivery of Canadian dollars to a broker) 58,560 105 106 107 108 10-Nov Cash 58,400 Dollar Receivable from Exchange Broker ($) (80000*.730) 58,400 (To record the receipt of U.S. dollars from the broker in accordance with the forward contract rate.) 109 110 111