Question

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Doering Company, a U.S. corporation with customers in several foreign countries, had the following selected transactions for 2015 and 2016.

  

2015

  

Apr.	8	Sold merchandise to Salinas & Sons of Mexico for $5,938 cash. The exchange rate for pesos is $0.1043 on this day.
July	21	Sold merchandise on credit to Sumito Corp. in Japan. The price of 1.5 million yen is to be paid 120 days from the date of sale. The exchange rate for yen is $0.0094 on this day.
Oct.	14	Sold merchandise for 19,000 pounds to Smithers Ltd. of Great Britain, payment in full to be received in 90 days. The exchange rate for pounds is $1.4566 on this day.
Nov.	18	Received Sumito’s payment in yen for its July 21 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $0.0092 on this day.
Dec.	20	Sold merchandise for 17,000 ringgits to Hamid Albar of Malaysia, payment in full to be received in 30 days. On this day, the exchange rate for ringgits is $0.4501.
Dec.	31	Recorded adjusting entries to recognize exchange gains or losses on Doering’s annual financial statements. Rates for exchanging foreign currencies on this day follow.

  

Pesos (Mexico)	$	0.1055
Yen (Japan)		0.0093
Pounds (Britain)		1.4620
Ringgits (Malaysia)		0.4456

  

2016

  

Jan.	12	Received full payment in pounds from Smithers for the October 14 sale and immediately exchanged the pounds for dollars. The exchange rate for pounds is $1.4699 on this day.
Jan.	19	Received Hamid Albar’s full payment in ringgits for the December 20 sale and immediately exchanged the ringgits for dollars. The exchange rate for ringgits is $0.4420 on this day.

7.

value:
1.00 points

Required information

Required:

1.

Prepare journal entries for the Doering transactions and adjusting entries. (Do not round your intermediate calculations. Enter your answers in whole dollars.) a. April 08,2015 - Sold merchandise to Salinas & Sons of Mexico for $5,938 cash. The exchange rate for pesos is $0.1043 on this day. b. Jul 21, 2015 - Sold merchandise on credit to Sumito Corp. in Japan. The price of 1.5 million yen is to be paid 120 days from the date of sale. The exchange rate for yen is $0.0094 on this day. c. Oct 14, 2015 - Sold merchandise for 19,000 pounds to Smithers Ltd. of Great Britain, payment in full to be received in 90 days. The exchange rate for pounds is $1.4566 on this day. d. Nov 18, 2015 - Received Sumito’s payment in yen for its July 21 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $0.0092 on this day. e. Dec 20, 2015 - Sold merchandise for 17,000 ringgits to Hamid Albar of Malaysia, payment in full to be received in 30 days. On this day, the exchange rate for ringgits is $0.4501. f. Dec 31, 2015 - Prepare adjusting entry to recognize exchange gains or losses related to pounds (Britain), The exchange rate for pounds (Britain) is $1.4620 on December 31, 2015. g. Dec 31, 2015 - Prepare adjusting entry to recognize exchange gains or losses related to ringgits (Malaysia), The exchange rate for ringgits (Malaysia) is $0.4456 on December 31, 2015. h. Jan 12, 2016 - Received full payment in pounds from Smithers for the October 14 sale and immediately exchanged the pounds for dollars. The exchange rate for pounds is $1.4699 on this day. i. Jan 19, 2016 - Received Hamid Albar’s full payment in ringgits for the December 20 sale and immediately exchanged the ringgits for dollars. The exchange rate for ringgits is $0.4420 on this day. 2.

Compute the foreign exchange gain or loss to be reported on Doering’s 2015 income statement. (Do not round your intermediate calculations. Round your final answers to the nearest whole dollar. Losses should be indicated by a minus sign.)

Answer 1

Doering Company, 1.Prepare journal entries for the Doering transactions and adjusting entries Date Particulars 8.4.2015 Cash a/c Debit in $ Credit in$ Dr. 5938 To Sales 5938 21.7.2015 Accounts receivable-Sumito a/c Dr 14100 To Sales 14100 14.10.2015 Accounts receivable-Smithers a/c Dr 27675 To Sales 27675 18.11.2015 Cash a/c Dr. 13800 Foreign exchange loss a/c Dr 300 To Accounts receivable-Sumito 14100 20.12.2015 Accounts receivable-Hamid Albar a/c Dr 7652 To Sales 7652 31.12.2015 Accounts receivable-Smithers a/c Dr 103 To Foreign exchange gain 103 31.12.2015 Foreign exchange loss a/c Dr To Accounts receivable-Hamid Albar 12.1.2016 Cash a/c Dr. 27928 To Accounts receivable-Smithers To Foreign exchange gain 27778 150 19.1.2016 Cash a/c 7514 61 Dr. Foreign exchange loss a/c Dr To Accounts receivable-Hamid Albar 7575

Explanation: 21.7.2015 (1,500,000 yen x $0.0094/yen) $14,100 14.10.2015 (£ 19,000 x $1.4566/E) $27,675 18.11.2015 (1,500,000 yen x $0.0092/yen) $13,800 20.12.2015 (17,000 ringgits x $0.4501/ringgits) $7,652 31.12.2015 Foreign Exchange Gain $103 Original measure (£19,000 x $1.4566/E) Year-end measure (E19,000 x $1.4620/E) Gain for the period 27675 27778 103 31.12.2015 Foreign Exchange Loss $77 Original measure (17,000 ringgits x $0.4501/ringgits) Year-end measure (17,000 ringgitsx $0.4456/ringgits Loss for the period 7652 7575 12.1.2016 Cash (£19,000 x $1.4699/E) $27,928 Accounts receivable-Smithers ($27,675 $103) $27,778 19.1.2016 Cash (17,000 ringgits x $0.4420/ringgits) - $7,514 Accounts receivable-Hamid Albar ($7,652-$77) $7,575 2.Compute the foreign exchange gain or loss to be reported on Doering's 2015 income statement Foreign exchange Nov-18 Dec-31 Dec-31 Total -300 103 274