Journal Entries—Exporting Transactions GAF manufactures electrical cells at its

Question

Journal Entries—Exporting Transactions

GAF manufactures electrical cells at its St. Louis facility. The company’s fiscal year-end is September 30. It has adopted the perpetual inventory cost flow method to control inventory costs. The company entered into the following transactions during the month of September. All exchange rates are direct quotations.

Billing Rate of

Date        Transaction                                                                  Amount                               Exchange

2014

Sept. 5 Exported 10 electrical cells to a company

located in Argentina. Cost per unit, $950. 17,341 pesos $1.1291

9       Received raw materials ordered from a British

company. The goods were shipped FOB

destination and had not been recorded on the

books of GAF, Inc. 12,200 Pounds 1.6821

14      Exported 12 electrical cells to a company

domiciled in Norway. Cost per unit, $970. 160,274 Krone .1450

30      End of fiscal year-end.

Peso 1.1091

British pound 1.6911

Krone .1530

Oct. 5 Received full payment for the 10 units sold on

September 5. 1.1190

9       Paid British company in full for raw materials

purchased September 9. 1.5948

30      Received full payment for 12 units sold on September 14. .1440

Required:

A. Prepare the journal entries required on the books of GAF to record the transactions and year-end adjustments. Round all computations to the nearest dollar.

B. Based on the two exporting transactions listed above, complete the following table.

Transaction

Sept. 5                     Sept. 14

September 30, 2014, year-end:

1. Sales

2. Transaction gain (loss)

September 30, 2015, year-end:

3. Sales

4. Transaction gain (loss)

5. Net effect on income for both years (Sum lines 1–4)

6. Cash received on settlement date

Explanation / Answer

Ans-

Journal entry

Sept 5- Account receviable a/c    Dr          $19580

               To sale a/c                $19580

(being export of goods to Argentina @ 17341 pesos where 1 pesos=$1.1291)

Sept-9

Raw material A/c Dr              $20522

          To Account payable a/c    $20522

(being raw material received from british company @12200 pound where 1pound=$1.6821)

Sept 14- Account receviable a/c    Dr          $23240

               To sale a/c                $23240

(being export of goods to Norway @ 160274 krone where 1 krone=$0.1450)

Oct-5 Bank A/c Dr                    $19405

                    To Account receviable         $19405

(being received from export on sept 5 )

Foreign exchange loss a/c Dr $175

   To Profit/loss A/c        $175

(being loss on foreign exchange on sale)

Oct-9 Account payable Dr $19457

                 To bank a/c   $19457
(Being paid on raw material received on sept 9)

Profit/loss A/c      Dr    $1065

           To Foreign exchange loss a/c $1065

(being Profit on foreign exchange )

Oct-30 Bank A/c Dr                    $23079

                          To Account receviable         $23079

(being received from export sale on sept 14 )

Foreign exchange loss a/c Dr $161

   To profit/loss A/c          $161

(being loss on foreign exchange sale)

Net gain or loss on transaction Sep-05 Sep-14 Sale 19045 23079 Less-Cost price 9500 11640 Transaction gain 9545 11439

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