Question

Problem 2: Impromptu Corp. purchased inventory from a foreign supplier on December 1, 2015 for 50.00 FCUs. Payment was made to the foreign supplier on January 31, 2016. The following exchange rates apply: Date 12/01/2015 12/15/2015 12/31/2015 01/31/2016 U.S. Dollar per FCU 0.50 0.52 0.48 0.52 4. What journal entry should be recorded by Impromptu on the date of purchase? a. Debit A/R: $25.000 b. Debit Inventory: $25,000 c. Debit Inventory: $50,000 d. Credit A/P: $50,000 5. What journal entry do we record at year end? a. Forex Gain $1,000 b. Forex Gain $2,000 c. Forex Loss $1,000 d. Forex Loss $2,000 e. Zero- unrealized gains or losses are not recognized 6. What journal entry should be reported by Impromptu on the date of payment? a. Credit Forex gain: $2,000 b. Credit Cash: $2,000 c. Debit Forex loss: $2,000 d. Debit Inventory: $1,000 e. None of the above

Answer 1

4. Answer is b. Debit Inventory $25000
i.e. 50000 x 0.50 = $25000 at date of purchase

5. Answer is c. Forex Loss $1000
i.e. (0.52-0.50) x 50000 = $1000

6. Answer is a. Credit Forex gain $2000
i.e. 50000 x (0.48-0.52) = $2000