Foreign Currency Transactions
Globe Shipping, a U.S. company, is an importer and exporter. The following are some transactions
with foreign companies.
1. Globe sold blue jeans to a South Korean importer on January 15 for $7,400, when the exchange rate was KRW1 = $0.185. Collection, in dollars, was made on March 15, when the exchange rate was $0.180.
2. On March 8, Globe purchased woolen goods from Ireland for 7,000 euros. The exchange rate was €1 = $0.622 on March 8, but the rate was $0.610 when payment was made on May 1.
3. On May 12, Globe signed a contract to purchase toys made in Taiwan for 80,000 Taiwan dollars (NT$). The toys were to be delivered 80 days later on August 1, and payment was due on September 9, which was 40 days after delivery. On May 12, Globe also entered into a 120-day undesignated forward contract to buy 80,000 Taiwan dollars at a forward rate of NT$1 = $0.0376. On August 1, the forward rate for a September 9 exchange is NT$1 = $0.0378. The spot rates were as follows:
May 12 | NT$1 = | $0.0370 |
August 1 | NT$1 = | 0.0375 |
September 9 | NT$1 = | 0.0372 |
4. Globe sold microcomputers to a German enterprise on June 6 for 150,000 euros. Payment was due in 90 days, on September 4. On July 6, Globe entered into a 60-day undesignated forward contract to sell 150,000 euros at a forward rate of €1 = $0.580. The spot rates follow:
June 6 | €1 = | $0.600 |
July 6 | €1 = | 0.590 |
September 4 | €1 = | 0.585 |
Required
Prepare all necessary journal entries for Globe to account for the foreign transactions, including the sales and purchases of inventory, forward contracts, and settlements.
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