On April 1, A. C. Corporation, a calendar-year U.S. electronics manufacturer, bu
ID: 2415359 • Letter: O
Question
On April 1, A. C. Corporation, a calendar-year U.S. electronics manufacturer, buys 32.5 million yen worth of computer chips from the Hidachi Company paying 10 percent down, the balance to be paid in 3 months. Interest at 8 percent per annum is payable on the unpaid foreign currency balance. The U.S. dollar/ Japanese yen exchange rate on April 1 was $1.00 = ¥93.6250; on July 1 it was $1.00 = ¥93.5283. Required: Prepare dated journal entries in U.S. dollars to record the incurrence and settlement of this foreign currency transaction assuming: a. A. C. Corporation adopts a single-transaction perspective, and b. it employs a two-transactions perspective.
Explanation / Answer
Date 1$ = 1 Yen= April 1. 93.6250 0.01068 Jul 1. 93.5283 0.01069 Journal Entry Single Transaction basis Date Account Title Dr $ Cr $ April 1. Inventory 347,130 Accounts Payable 347,130 (purchase @$=93.6250 Yen) Jul 1. Cash 347,488 Accounts Payable 347,130 Inventory 358 (payment @$=93.5283 Yen) Journal Entry Two Transaction basis Date Account Title Dr $ Cr $ April 1. Inventory 347,130 Accounts Payable 347,130 (purchase @$=93.6250 Yen) Jul 1. Cash 347,488 Accounts Payable 347,130 Foreign Exchange Loss 358 (payment @$=93.5283 Yen)
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