144331/external tools/353632 NTERNATIONAL ACCOUNTING Gabrielle , CUCK HERE TO RE

Question

144331/external tools/353632 NTERNATIONAL ACCOUNTING Gabrielle , CUCK HERE TO REMEW LEARNING OBJECTIMES QUESTION 2 Incomplete answer Maried aut of 1000 question Journal entries for an account receivable denominated in Euros (SUS weakens) October 15. The invoice specifles that payment is to be made Assume that your company sells products to a customer located in France on January 15 in turos (E) in the amount of 220.000, Your company operates on a calendar year basis. Assume the following exchange rates October 15 $1.05 December 31 51.1%(1; January 15 $1.20: Prepare the journal entries to record the sale (ignore cost of goods sold), the required adjusting entry at December 31, and the receipt of payment january 15. General Journal Description Om 15 DOLL F12 insert PrntScDet Backspace 5 6 8 9

Explanation / Answer

Total amount of sales (in $ tems) = 220,000 euros * $1.05 per euro (exchange rate on October 15th)

= $231,000

This is the sale amount.

On December 31, USD depreciated to $1.15 per Euro. This will lead to foreign currency transaction gain. Amount of gain = (1.15 - 1.05)*220,000 = $22,000

On January 15, USD further depreciated to $1.20 per Euro. Thus cash received will be $1.20*220,000 = $264,000

Amount of accounts receivable is 231,000+22,000 = 253,000. Thus foreign currency transaction gain will be recognized again.

Journal entries:

Date Particulars Dr Cr 15-Oct Accounts receivable 231,000.00 Sale 231,000.00 (to record sale at USD 1.05: Euro 1) 31-Dec Accounts receivable 22,000.00 Foreign currency transaction gain 22,000.00 (to record increase in accounts receivable to USD 1.15: Euro 1) 15-Jan Cash 264,000.00 Accounts receivable 253,000.00 Foreign currency transaction gain 11,000.00 (to record receipt of accounts receivable at rate of USD 1.20:Euro 1)

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