Exercise Albert#1 Albert Corp. Prepares its financial statements under U.S. GAAP

Question

Exercise Albert#1 Albert Corp. Prepares its financial statements under U.S. GAAP During the Year The company begins operations on January 1, 2016. The company is started by issuing 25,000 shares of common stock for $4,000,000 ($1 Par value stock) The company immediately purchases $2,000,000 in inventory for cash and sells $400,000 of this inventory to customer #1 for $500,000 on credit. The company purchases a machine for $300,000 cash on January 1t and depreciates it over 20 years (depreciation is recorded at year end and there is no salvage value) On June 1st, customer #1 pays us $250,000 of the amount due. · During June $100,000 dollars of research and development expenses are incurred. $20,000 has not been paid as of yearend. On November 1, Year, 1 Albert sold merchandise to a foreign customer for 600,000 Pesos with payments to be received on April 30, year 2. COGS associated with the sale is $1,000,000. Albert entered into a six-month forward contract to sell 600,000 Pesos. The forward contract is properly designated as a cash flow hedge of a foreign currency receivable. Relevant exchange rates for the Peso are: Spot Rate 2.00 Forward Rate (to April 30, year 2) 1.97 Date November 1, Year 1 December 31, Year April 30, Year 2 1.96 1.95 1.90 The present value factor for four months is .9610 Albert references the value of the forward contract based on changes in the forward rate On December1, Year, 1 Albert sold merchandise to a foreign customer for 300,000 Kroners with payments to be received on February 15 Year 2. Albert

Explanation / Answer

Only some of the journal entries has been recorded due to lack of time. remaining will be provided later.

S.l.No

Date

Particulars

Details

Debit

Credit

1

01-01-16

Cash a/c (25000 Shares)

Issue of common stock

4000000

Common stock a/c

4000000

2

Accounts payable a/c

Purchase of Inventory

2000000

Cash a/c

2000000

3

Accounts receivables a/c

Sale of inventory on account

500000

Sales

500000

4

Cost of goods sold a/c

Sale of inventory above the cost

400000

Inventory

400000

5

01-01-16

Machinery a/c

Purchase of Machinery for cash

300000

Cash a/c

300000

6

01-06-18

Cash a/c

Customer pays the Due amount

250000

Accounts receivables a/c

250000

7

Research and development expenses

Research &dev expenses

100000

cash a/c

80000

Accounts payable a/c

20000

7550000

7550000

S.l.No

Date

Particulars

Details

Debit

Credit

1

01-01-16

Cash a/c (25000 Shares)

Issue of common stock

4000000

Common stock a/c

4000000

2

Accounts payable a/c

Purchase of Inventory

2000000

Cash a/c

2000000

3

Accounts receivables a/c

Sale of inventory on account

500000

Sales

500000

4

Cost of goods sold a/c

Sale of inventory above the cost

400000

Inventory

400000

5

01-01-16

Machinery a/c

Purchase of Machinery for cash

300000

Cash a/c

300000

6

01-06-18

Cash a/c

Customer pays the Due amount

250000

Accounts receivables a/c

250000

7

Research and development expenses

Research &dev expenses

100000

cash a/c

80000

Accounts payable a/c

20000

7550000

7550000

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