Question

cant figure out final solution. how do you figure out . impact on 2017 income?

Credit No 1 Date Date 12/01/2017 General Journal Cost of goods sold Accounts payable (K) Debit 59,500.00 59,500.00 2 12/01/2017 No journal entry required P 3 12/31/2017 1,700.00 Foreign exchange loss Accounts payable (K) 1,700.00 12/31/2017 No journal entry required 5 12/31/2017 2,083.14 Forward contract Gain on forward contract 2,083.14 12/31/2017 No journal entry required 7 03/01/2018 2,550.00 Foreign exchange loss Accounts payable (K) 2,550.00 8 03/01/2018 No journal entry required 9 03/01/2018 891.86 Forward contract Gain on forward contract 891.86 10 03/01/2018 No journal entry required Prev 40 Next

Answer 1

Solution to A-2 - Impact on 2017 Income

We need to see all the entries related to 2017 year to calculate the impact on income for 2017.

Below are the item of the entries accounted in 2017

1) Cost of Good Sold - 59,500

2) Foreign Exchange Loss - 1700

3) Gain on forward contract - 2083.14

Item 1 & 2 is an expense and item 3 is an income, so accordingly the impact on 2017 income is = 59500 + 1700 - 2083.14 = 59,116.86

A-3 Similarly Below are the item of entries accounted in 2018

1) Foreign Exchange Loss - 2550

2) Gain on forward contract - 891.86

Item 1 is an expense and item 2 is an income, so accordingly the impact on 2018 income is = 2550- 891.86 = 1658.14

A-4 Impact on net income is equal to = 59,116.86 + 1658.14 = 60,775