ADVANCED FIN. ACCT. LL W/ACCESS>CUSTOM<
12th Edition
ISBN: 9781265074623
Author: Christensen
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 11.14.5E
To determine
Foreign exchange rate: The rate at which currency of one country is changed to currency of another country is called foreign exchange rate. Mainly there are two rate, i.e. direct exchange rate and indirect exchange rate.
Foreign exchange gain or loss: Foreign exchange gain or loss arises when there is selling or buying of any goods and services in foreign currency.
To choose: The correct answer.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Foreign currency transactions
Use the following information for the next two questions:
On December 1, 20x1, Entity A sells good to Entity B, on credit, for a total sale price of $1,000.
Entity B settles the account on January 6, 20x1. Entity A's functional currency is the Philippine
peso (P). The relevant exchange rate are as follows:
Dec. 1, 20x1
Dec. 31, 20x1
Jan. 6, 20x1
P50:$1
P52:$1
P41:$1
How much is the foreign exchange gain (loss) to be recognized by Entity A on December 31,
20x1?
On March 1, Laton Products (a U.S. firm) purchased manu-facturing inputs from a Mexican supplier for 20,000 pesos,
payable on June 1. The exchange rate for pesos on March 1was $0.17. If the exchange rate increases to $0.19 on June 1,what amount of gain or loss would be reported by Latonrelated to the currency exchange?a. $400 gain.b. $200 loss.c. $400 loss.d. $200 gain.
1.
On September 1, 20X1, Cano & Company, a U.S. corporation, sold merchandise to a foreign firm for 250,000 euros. Terms of the sale require payment in euros on February 1, 20X2. On September 1, 20X1, the spot exchange rate was $1.30 per euro. At Cano’s year-end on December 31, 20X1, the spot rate was $1.28, but the rate increased to $1.33 by February 1, 20X2, when payment was received.
Required:
What foreign currency transaction gain or loss should be recorded in 20X1?
What foreign currency transaction gain or loss should be recorded in 20X2?
Amount
Gain / Loss
1.
Foreign currency transaction gain (loss) 20X1
2.
Foreign currency transaction gain (loss) - 20X2
Chapter 11 Solutions
ADVANCED FIN. ACCT. LL W/ACCESS>CUSTOM<
Ch. 11 - Prob. 11.1QCh. 11 - Prob. 11.2QCh. 11 - The U.S. dollar strengthened against the European...Ch. 11 - Prob. 11.4QCh. 11 - Prob. 11.5QCh. 11 - How are assets and liabilities denominated in a...Ch. 11 - Prob. 11.7QCh. 11 - Prob. 11.8QCh. 11 - Prob. 11.9QCh. 11 - Distinguish between an exposed net asset position...
Ch. 11 - Prob. 11.11QCh. 11 - Prob. 11.12QCh. 11 - Effects of Changing Exchange Rates Analysis Since...Ch. 11 - Prob. 11.2CCh. 11 - Prob. 11.5CCh. 11 - Prob. 11.1ECh. 11 - Prob. 11.2ECh. 11 - Basic Understanding of Foreign Exposure The...Ch. 11 - Prob. 11.5ECh. 11 - Prob. 11.6ECh. 11 - Prob. 11.7ECh. 11 - Adjusting Entries for Foreign Currency Balances...Ch. 11 - Prob. 11.9ECh. 11 - Prob. 11.10ECh. 11 - Prob. 11.11.1ECh. 11 - Prob. 11.11.2ECh. 11 - Prob. 11.11.3ECh. 11 - Prob. 11.11.4ECh. 11 - Prob. 11.11.5ECh. 11 - Prob. 11.11.6ECh. 11 - Prob. 11.11.7ECh. 11 - Prob. 11.12ECh. 11 - Prob. 11.13ECh. 11 - Prob. 11.14.1ECh. 11 - Foreign Currency Transactions [AICPA Adapted]...Ch. 11 - Prob. 11.14.3ECh. 11 - Prob. 11.14.4ECh. 11 - Prob. 11.14.5ECh. 11 - Foreign Currency Transactions [AICPA Adapted]...Ch. 11 - Prob. 11.14.7ECh. 11 - Prob. 11.15ECh. 11 - Prob. 11.16AECh. 11 - Prob. 11.17ECh. 11 - Prob. 11.18ECh. 11 - Prob. 11.19.1ECh. 11 - Prob. 11.19.2ECh. 11 - Prob. 11.19.3ECh. 11 - Prob. 11.19.4ECh. 11 - Prob. 11.19.5ECh. 11 - Prob. 11.20.1PCh. 11 - Prob. 11.20.2PCh. 11 - Prob. 11.20.3PCh. 11 - Prob. 11.20.4PCh. 11 - Prob. 11.20.5PCh. 11 - Foreign Sales Tex Hardware sells many of its...Ch. 11 - Prob. 11.22PCh. 11 - Prob. 11.23.1PCh. 11 - Prob. 11.23.2PCh. 11 - Prob. 11.24PCh. 11 - Prob. 11.25PCh. 11 - Prob. 11.26PCh. 11 - Prob. 11.27.1PCh. 11 - Prob. 11.27.2PCh. 11 - Prob. 11.27.3PCh. 11 - Prob. 11.28APCh. 11 - Prob. 11.29.1BPCh. 11 - Prob. 11.29.2BPCh. 11 - Prob. 11.29.3BPCh. 11 - Prob. 11.29.4BPCh. 11 - Prob. 11.29.5BPCh. 11 - Prob. 11.29.6BPCh. 11 - Prob. 11.30BPCh. 11 - Prob. 11.31BPCh. 11 - Matching Key Terms Match the items in the lefthand...
Knowledge Booster
Similar questions
- 1. On May 1, Harris purchased parts from a Japanese company for a U.S. dollar-equivalent value of $8,400 to be paid on June 20. The exchange rates were May 1 June 20 2. On July 1, Harris sold products to a Brazilian customer for a U.S. dollar equivalent of $10,000, to be received on August 10. Brazil's local currency unit is the real. The exchange rates were July 1 August 10 Required: a. Assume that the two transactions are denominated in U.S. dollars. Prepare the entries required for the dates of the transactions and their settlement in U.S. dollars. b. Assume that the two transactions are denominated in the applicable LCUs of the foreign entities. Prepare the entries required for the dates of the transactions and their settlement in the LCUs of the Japanese company (yen) and the Brazilian customer (real). Answer is not complete. Complete this question by entering your answers in the tabs below. No Required A Required B Assume that the two transactions are denominated in the…arrow_forward2) On December 1, 20X1, Rone Imports, a U.S. company, purchased clocks from Switzerland for 15,000 francs (SFr) to be paid on January 15, 20X2. Rone’s fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are December 1, 20X1 1 SFr = $0.70 December 31, 20X1 1 SFr = 0.66 January 15, 20X2 1 SFr = 0.68 b. Prepare journal entries for Rone to record the purchase, the adjustment on December 31, and the settlement.arrow_forward2) On December 1, 20X1, Rone Imports, a U.S. company, purchased clocks from Switzerland for 15,000 francs (SFr) to be paid on January 15, 20X2. Rone’s fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are December 1, 20X1 1 SFr = $0.70 December 31, 20X1 1 SFr = 0.66 January 15, 20X2 1 SFr = 0.68 b. Prepare journal entries for Rone to record the purchase, the adjustment on December 31, and the settlement. 1 Record the purchase of the clocks. 2 Record the revaluation of the foreign currency payable to the U.S. dollar equivalent value. 3 Record the revaluation of accounts payable to the current U.S. dollar equivalent. 4 Record the purchase of Swiss francs. 5 Record the settlement of the payables.arrow_forward
- GreenView Company's receivable from a foreign customer is denominated in the customers local currency, the Brazilian Real (BRL). This receivable totaled 900,000 BRL and was translated to $300,000 at December 31, 20X5. On January 31, 20X6, the receivable was collected from the customer at an exchange rate of 4 BRL to $1. What journal entry should GreenView record in January? Dr. Foreign currency units 300,000 Cr. Accounts receivable Dr. Foreign currency units 225,000 2. Cr. Accounts receivable 01. 03. 4. Dr. Foreign currency units 300,000 Cr. Exchange gain Cr. Accounts receivable Dr. Foreign currency units Dr. Exchange loss Cr. Accounts receivable 225,000 75,000 300,000 225,000 75,000 225,000 300,000arrow_forwardSubject :- Accountingarrow_forwardThe correct answer is shownl. Please show solutions why.arrow_forward
- On May 1, 20X1, Aero Electric Corporation, a U.S. company, purchased goods from Neon Circuit Corporation, a British company, on account for £55,000. Aero Electric entered into a 180-day forward exchange contract to offset its exposed foreign currency liability. On the purchase date, the spot rate was $1.57 per British pound and the forward exchange rate was $1.62 per pound. Which of the following are true of the journal entry recorded for the forward contract on Aero Electric's books? (Select all that apply) Group of answer choices Debit Foreign Currency Receivable from Exchange Broker (£) for $89,100. Credit Dollars Payable to Exchange Broker ($) for $86,350. Credit Dollars Payable to Exchange Broker ($) for $89,100. Debit Foreign Currency Receivable from Exchange Broker (£) for $86,350.arrow_forwardOn December 1, 20X1, Rone Imports, a U.S. company, purchased clocks from Switzerland for 15,000 francs (SFr) to be paid on January 15, 20X2. Rone’s fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are December 1, 20X1 1 SFr = $0.70 December 31, 20X1 1 SFr = 0.66 January 15, 20X2 1 SFr = 0.68 Required: In which currency is the transaction denominated? Prepare journal entries for Rone to record the purchase, the adjustment on December 31, and the settlemenarrow_forwardOn June 1, a calendar year U.S. manufacturer sells, on 60-day credit, goods to Oman importer for US$ 1,000,000. The Dollar/Rial exchange rate is OMR 1 = US$ 0.40 on June 1, and OMR 1 = $ 0.39 on August 1. Required: Prepare dated journal entries in Oman Rials to record the incurrence and settlement of this foreign currency transaction assuming It employs a two-transaction perspective.arrow_forward
- On December 1, Y1, AAA, a US based company, entered into a three months forward contract to purchase 1 million foreign currency FC, on March 1, Y2. The following US per FC exchange rates apply: Date Spot Rate Forward Rate December 1, Y1 $0.088 $0.084 December 31, Y1 $ 0.080 $0.074 March 1, Y2 $0.076 AAA borrowing rate is 12%. The present value factor for 2 months at an annual rate is 0.9803. How would AAA report the forward contract on its balance sheet on December 31, Y1? Justify your answer and show your calculations. 3 pts As a liability of 9,803. 1,000,000 x (0.084-0.074) = 10,000 x 0.9803 = 9803arrow_forwardOn December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows: Spot Rate Forward Rate for March 12, 20X6 December 12, 20X5 $ 0.88 $ 0.90 December 31, 20X5 0.98 0.93 3. Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a hedge. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract? multiple choice $10,000 $0 $5,000 $3,000 4. Dahl entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Dahl’s specifications. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract? multiple choice $10,000 $0 $5,000…arrow_forwardKA. Mint Corporation has several transactions with foreign entities. Each transaction is denominated in the local currency unit (LCU) of the country in which the foreign entity is located. On November 2, 20X8, Mint purchased confectionary items on account from a foreign company at a price of LCU 23,000 when the direct exchange rate was 1 LCU = $1.08. The account has not been settled as of December 31, 20X8, (Mint’s accounting year end) when the exchange rate has increased to 1 LCU = $1.10. On January 29, 20X9 the account was settled with Mint’s payment of LCU 23,000 when the exchange rate decreased to 1 LCU = $1.07 Required: Record all journal entries for the 1) Transaction date, 2) Yearend adjusting entry, and 3) Settlement date.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education