Question

Lagos Brokers is a manufacturer of curtains and engages in numerous import and export activities. Lagos receivables and payables in foreign currency units before year-end adjustments on December 31, 2019 are summarized as follows:

                                                            Rate on

Foreign                       Currency         Date of            Current Rate            Settlement Rate

Currency                     Units               Transaction   12/31/19         in 2020

Accounts Receivable

British Pds                   40,000            1.280                $1.32                $  1.350                 

Euros                            70,000            1.180                  1.19                    1.175     

Swiss Francs                80,000            1.09                    1.065                  1.055

Yen                             8,000,000           .010                .0088                     .0081

Accounts Payable

Brazilian Real                600,000         .183                  .202                     .215

Pesos                          1,250,000         .046                  .043                    .041

Yen                             7,600,000         .015                  .019                     .021

REQUIRED:

1. Determine the amount at which the receivables and payables should be reported in Lagos’ December 31, 2019 balance sheet.

2. Calculate currency gains and losses that should appear in Lagos’ 2019 and 2020 income statements.

Answer 1

Part 1

Accounts Receivable	Currency units	Rate on Date of Current Rate	Convereted value on Reported Date
British Pds	40,000	1.320	52,800
Euros	70,000	1.190	83,300
Swiss Francs	80,000	1.065	85,200
Yen	8,000,000	0.0088	70,400
Total			291,700
Accounts Payable	Currency units	Rate on Date of Current Rate	Convereted value on Reported Date
British Pds	600,000	0.202	121,200
Euros	1,250,000	0.043	53,750
Swiss Francs	7,600,000	0.019	144,400
Total			319,350

Amount at which the receivables and payables should be reported in Lagos’ December 31, 2019 balance sheet
Receivables	291,700
Payables	319,350

Part 2

Accounts Receivable	Currency units	Rate on Date of Transaction	Convereted value on Transaction Date
British Pds	40,000	1.280	51,200
Euros	70,000	1.180	82,600
Swiss Francs	80,000	1.090	87,200
Yen	8,000,000	0.010	80,000
Total			301,000
Accounts Payable	Currency units	Rate on Date of Transaction	Convereted value on Transaction Date
Brazilian Real	600,000	0.183	109,800
Pesos	1,250,000	0.046	57,500
Yen	7,600,000	0.015	114,000
Total			281,300

Year 2019
Accounts receivable Convereted value on Transaction Date	301,000
Less: Accounts receivable Convereted value on Reported Date	291,700
Loss due to decrease in accounts receivable	9,300
Accounts payable Convereted value on Reported Date	319,350
Less: Accounts payable Convereted value on Transaction Date	281,300
Loss due to increase in accounts payable	38,050
Loss due to decrease in accounts receivable	9,300
Loss due to increase in accounts payable	38,050
Currency gains and losses that should appear in Lagos’ 2019	47,350

Accounts Receivable	Currency units	Rate on Settlement Rate	Convereted value on Settlement Date
British Pds	40,000	1.350	54,000
Euros	70,000	1.175	82,250
Swiss Francs	80,000	1.055	84,400
Yen	8,000,000	0.0081	64,800
Total			285,450
Accounts Payable	Currency units	Rate on Settlement Rate	Convereted value on Settlement Date
British Pds	600,000	0.215	129,000
Euros	1,250,000	0.041	51,250
Swiss Francs	7,600,000	0.021	159,600
Total			339,850

Year 2020
Accounts receivable Convereted value on Reported Date	291,700
Less: Accounts receivable Convereted value on Settlement Date	285,450
Loss due to decrease in accounts receivable	6,250
Accounts payable Convereted value on Settlement Date	339,850
Less: Accounts payable Convereted value on Reported Date	319,350
Loss due to increase in accounts payable	20,500
Loss due to decrease in accounts receivable	6,250
Loss due to increase in accounts payable	20,500
Currency gains and losses that should appear in Lagos’ 2020	26,750