Question

Nour company (a U.S. company) began operations on December 1, 2020, when Nour Invested $150,000 of her cash savings in the business. In the first month of operations, Nour had the following transactions:

 December 3, 2020    Bought inventory for 100,000 foreign currency units (FCU) on account. Must be paid with foreign currency units.

 December 8, 2020      Sold 60% of inventory acquired on 1/12/20 for 32,000 British pounds on account. Invoice denominated in British pounds

 

December 10, 2020    Paid $3,000 in other operating expenses

 December 23, 2020  Acquired and paid half of the foreign currency units. owed to the foreign supplier

 

December 28, 2020 Collected half of the 32,000 pounds from the customer in Great Britain and immediately converted them into U.S. dollars

 

The following exchange rates apply:

Date                Rate                                         Rate

December 3    $.6260 = 1 FCU                      $1.5950 = 1 pound

December 8    $.6230 = 1 FCU                      $1.5760 = 1 pound

December 10  $.6210 = 1 FCU                      $1.5880 = 1 pound

December 23  $.6250 = 1 FCU                      $1.5610 = 1 pound

December 28  $.6330 = 1 FCU                      $1.5570 = 1 pound

December 31  $.6180 = 1 FCU                      $1.5720 = 1 pound

 

Required:

1)    Prepare the required journal entries (Including the adjusting entries) at Nour Company to record the previous transactions.

2)    Assuming there were no other transactions, Calculate the net income for the month ended December 31, 2020 and Calculate the amounts that should appear in the balance sheet of Nour company on December 31, 2020, for the following items:

a)     Cash.

b)    Accounts Receivable.

c)     Inventory.

d)  Accounts Payable.      

Answer 1

STATEMENT OF FINANCIAL POSITION
Assets
Current Assets:
Cash	20000
Accounts receivable	150000
Interest receivable	780
Notes receivable	26000
Inventory	140000
Supplies	500
Prepaid insurance	900
Total current assets		338180
Non-current Assets
Equipment	200000
Less: Accumulated depreciation-Euqipment	42000	158000
Buildings	360000
Less: Accumulated depreciation-Building	57000	303000
Land		160000
Total Non-current Assets		621000
Total Assets		959180
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	72700
Notes payable	30000
Dividends payable	47000
Wages payable	2800
Unearned revenue	4000
Total current liabilities		156500
Shareholders Equity:
Common Shares	570000
Retained earnings	232680
Total shareholders' equity		802680
Total liabilities and Shareholders' Equity		959180
Workings for Income Statement:	INCOME STATEMENT
	Debit	Credit
		963000
	2500	780
	125000	2000
	2000
	76000
	5400
	5200
	590000
	3200
	17000
	22000
	2800
	851100	965780
		114680