Question

Part I

Maple Company had the following export and import transactions during 20X5: On March 1, Maple sold goods to a Canadian company for C$30,000, receivable on May 30. The spot rates for Canadian dollars were C$1 = $0.65 on March 1 and C$1 = $0.68 on May 30. On July 1, Maple signed a contract to purchase equipment from a Japanese company for ¥500,000. The equipment was manufactured in Japan during August and was delivered to Maple on August 30 with payment due in 60 days on October 29. The spot rates for yen were ¥1 = $0.102 on July 1, ¥1 = $0.104 on August 30, and ¥1 = $0.106 on October 29. The 60-day forward exchange rate on August 30, 20X5, was ¥1 = $0.1055. On November 16, Maple purchased inventory from a London company for £10,000, payable on January 15, 20X6. The spot rates for pounds were £1 = $1.65 on November 16, £1 = $1.63 on December 31, and £1 = $1.64 on January 15, 20X6. The forward rate on December 31, 20X5, for a January 15, 20X6, exchange was £1 = $1.645. Required: Prepare journal entries to record Maple’s import and export transactions during 20X5 and 20X6. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

a-1

1. Record the sale of goods.

	Date General Journal Debit Credit Mar. 1, 20X5

2. Record the foreign currency transaction gain or loss.

	Date General Journal Debit Credit May 30, 20X5

3. Record the receipt of foreign currency receivables.

	Date General Journal Debit Credit May 30, 20X5

4. Record the receipt of foreign currency.

	Date General Journal Debit Credit May 30, 20X5

a-2

1. Record the commitment to purchase the equipment.

	Date General Journal Debit Credit Jul. 1, 20X5

2. Record the purchase of the equipment.

	Date General Journal Debit Credit Aug. 30, 20X5

3. Record the revaluation of the foreign currency.

	Date General Journal Debit Credit Oct. 29, 20X5

4. Record the receipt of foreign currency.

	Date General Journal Debit Credit Oct. 29, 20X5

5. Record the payment of accounts payable.

	Date General Journal Debit Credit Oct. 29, 20X5

Answer 1

a-1

1.

Date	General Journal	Debit	Credit
Mar 1,20X5	Accounts Receivable (C$)	19,500
	Sales		19,500
	(C$ 30,000 * $0.65(spot rate)
	(To record sale of goods:)

2.

Date	General Journal	Debit	Credit
May 30,20X5	Accounts Receivable (C$)	900
	Foreign currency transaction gain		900
	C$ 30,000 * $0.03(0.68 - 0.65)
	(To  record the foreign currency transaction gain or loss.)

3.

Date	General Journal	Debit	Credit
May 30,20X5	Foreign currency units (C$)	20,400
	Accounts Receivable (C$)		20,400
	(C$ 30,000 * $0.68)
	(To record  receipt of foreign currency receivables)

4.

Date	General Journal	Debit	Credit
May 30,20X5	Cash	20,400
	Foreign currency units (C$)		20,400
	( To record receipt of foreign currency)

a-2)

1.

Date	General Journal	Debit	Credit
July 1,20X5	" No journal entry required "
	(As contract to purchase of equipment is signed)

2.

Date	General Journal	Debit	Credit
Aug 30,20X5	Equipment	52,000
	Accounts payable (¥)		52,000
	¥500,000 * $ 0.104
	( To record purchase of the equipment)

3.

Date	General Journal	Debit	Credit
Oct 29,20X5	Foreign currency transaction loss	1,000
	Accounts payable (¥)		1,000
	¥500,000 * $ 0.002($ 0.106 - 0.104)
	(To record  revaluation of the foreign currency)

4.

Date	General Journal	Debit	Credit
Oct 29,20X5	Foreign currency units (¥)	53,000
	Cash		53,000
	( ¥500,000 * $0.106)

5.

Date	General Journal	Debit	Credit
Oct 29,20X5	Accounts payable (¥)	53,000
	Foreign currency units (¥)		53,000
	(To record payment of accounts payable)