Angela’s Artwork Inc. (Angela’s) recently entered into a contract to supply artwork to a U.S. company. The controller of Angela’s is not experienced with translation of foreign currency transactions and has made the following entries to record sales to the U.S. company without factoring in the impact of foreign currency on the transactions: To record sales in USD dollars: DR Accounts receivable $156,000 CR Sales $156,000 To record the collection of a portion of the receivable: DR Cash (USD) $90,000 CR Accounts receivable $90,000 To record the conversion of a portion of USD cash to CDN cash: DR Cash (CDN) $78,000 CR Sales $18,000 CR Cash (USD) $60,000 Sales were made evenly over a period when the exchange rate was US$1.00 = C$1.33, and the exchange rate at the end of the fiscal year was US$1.00 = C$1.25. The foreign exchange gain or loss to be reported on these transactions is determined as follows: Question 2 options: a) By comparing translated year-end receivables to translated sales b) By comparing the sum of Canadian cash, translated year-end receivables, and translated U.S. cash to translated sales c) By comparing the sum of translated year-end receivables and translated U.S. cash to translated sales. d) There would be no foreign exchange gain or loss because the difference is an adjustment to sales
Correct option is (b) By comparing the sum of Canadian cash, translated year end receivables and translated U.S. cash to translated sales.
The difference is not an adjustment to sales rather it is foreign exchange gain or loss, which is calculated by comparing the sum of Canadian cash, translated year end receivables and translated U.S. cash to translated sales.
Angela’s Artwork Inc. (Angela’s) recently entered into a contract to supply artwork to a U.S. company....
Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1 2016. The following account balances for the year ending December 31, 2017, are stated in kanquo (KQ), the local currency: Sales Inventory (bought on 3/1/17) Equipment (bought on 1/1/16) Rent expense Dividends (declared on 10/1/17) Notes receivable (to be collected in 2020) Accumulated depreciation-equipment Salary payable Depreciation expense KQ 260,000 156,000 72,000 16,000 26,000 42,000 21,600 6,200 7,200 The following U.S.S per KQ exchange rates...
Blue Ltd, an Australian company, incorporated a foreign subsidiary Grey Ltd on 1 July 20X1 with capital contribution of FC $100,000. ‘FC’ is a foreign currency used as the functional currency of Grey Ltd. The presentation currency of the Blue Group is AUD. The trial balance of Grey Ltd in FC at 30 June 20X2 is as follows: Grey Ltd Trial balance at 30 June 20X2 FC FC DR. CR. Total assets 400,000 Total liabilities 200,000 Issued capital 100,000 Sales ...
On December 10, 2020, Robin Franchises, a U.S. company, received
a purchase order from a U.K. customer for delivery of merchandise
on January 15, 2021. The price of the merchandise is £10,000,000,
payable on March 15, 2021, in pounds. To hedge its exposure to
exchange rate changes, on December 10, 2020, Robin entered a
forward contract for delivery of £10,000,000 to the broker on March
15, 2021. The merchandise was delivered as scheduled. On March 15,
2021, Robin received payment...
Foreign Currency Translation US. Multi Company established a foreign subsidiary, called EorSub Company, on January 1, 2,013. The local currency is the crOwn; on the date the subsidiary was established, the exchange rate was 2 crowns to 1 U.S. dollar. U.S. Multi invested U.S.$6,000 to get things started. In addition, a local loan in the amount of 8,000 crowns, equivalent to U.S.$4,000, was obtained. EorSub used the 20,000 crowns in initial financing to acquire the following assets: (In crowns) 2,000...
Merchant Company had the following foreign currency transactions: 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 €240,000 by Merchant Company. On November 1, 20X6, Merchant purchased machine parts from a company located in Berlin, Germany. Merchant is to pay €120,000 on February 1, 20X7. The direct exchange rates are as follows: November 1, 20X6 €1 = $...
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 27,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 27,000 dinars on March 1, 2021.Relevant exchange rates for the dinar on various dates are as follows: DateSpot RateForward Rate(to March 1, 2021)December 1, 2020$4.50$4.575December...
On April 1, A. C. Corporation, a calendar-year U.S. electronics manufacturer, buys 32.5 mil- lion yen worth of computer chips from the Hidachi Company paying 10 percent down, the balance to be paid in 3 months. Interest at 8 percent per annum is payable on the unpaid foreign currency balance. The U.S. dollar/ Japanese yen exchange rate on April 1 was $1.00 = ¥93.6250; on July 1 it was $1.00 = ¥93.5283. Required: Prepare dated journal entries in U.S. dollars...
Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 30,800 dinars accounts receivable of 82,500 dinars, and land that cost 225,000 dinars when acquired on April 1, 2016. On January 1, 2017, Zugar has a 175,000 dinar note payable, and no other liabilities. On May 1, 2017, Zugar renders services to a customer for 145,000 dinars, which was immediately paid in cash. On June 1, 2017, Zugar incurred a...
Data regarding Petrilla Corp. in March 20X9: Selected opening balances: GST payable $ 66,400 (cr.) CPP payable 4,700 (cr.) EI payable 6,700 (cr.) Income tax deductions payable 18,480 (cr.) Cash sales for the period, $1,070,000 plus 5% GST. Monthly payroll, $135,000; less EI, $4,700; CPP, $3,700; income tax, $13,700. The employer portion of payroll taxes was also recorded. Inventory purchases on account, $1,670,000 plus 5% GST. Cash sales, $3,270,000, plus 5% GST. Sales to U.S. customer on account, US$187,000. There...
Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 25,200 dinars accounts receivable of 81,400 dinars, and land that cost 214,000 dinars when acquired on April 1, 2016. On January 1, 2017, Zugar has a 164,000 dinar note payable, and no other liabilities. On May 1, 2017, Zugar renders services to a customer for 134,000 dinars, which was immediately paid in cash. On June 1, 2017, Zugar incurred a...