Question

Exercise 16-14 Journalize the following foreign-currency transactions for Kingsway Import Inc.: 2017 Nov. 17 Dec. 16 19 Purchased goods on account from a Japanese company. The price was 500,000 yen, and the exchange rate of the yen was $0.0117 Paid the Japanese supplier when the exchange rate was $0.0120. Sold merchandise on account to a French company at a price of 80,000 euros. The exchange rate was $1.57 Adjusted for the decrease in the value of the euro, which had an exchange rate of $1.54. Kingsway Import Inc.'s year end is December 31 31 2018 Jan. 14 Collected from the French company. The exchange rate was $1.58.

Answer 1

Solution:

Date	Account Titles and Explanation	Debit	Credit
Nov.17`2017	Purchase (500,000 * $0.0117 per yen )	$       5,850.00
	Accounts Payable		$      5,850.00
	(Being Purchased made on account)
Dec. 16`2017	Accounts Payable (500,000 * 0.0120)	$       5,850.00
	Foreign Currency Exchange Loss	$           150.00
	Cash		$      6,000.00
	( Being cash paid to account payable with exchange loss)
Dec. 19`2017	Accounts Receivables (80,000 * $1.57 )	$   125,600.00
	Merchandise sales		$ 125,600.00
	( Being sales made on account)
Dec. 31`2017	Foreign Currency Exchange Loss	$       2,400.00
	Accounts Receivables (80,000 *$0.03($1.57- $1.54 ))		$      2,400.00
	(Being year end exchange rate differences accounted)
Jan. 14`2018	Cash (80,000 * $1.58)	$   126,400.00
	Accounts Receivables		$ 123,200.00
	Foreign Currency Exchange Gain		$      3,200.00
	(Being payment received on account receivables)

Note:

1) Exchange calculations are presented beside journal entry itself for better understanding.