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    Argosy University/ Phoniex University/
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Category > Management Posted 19 Jan 2018 My Price 9.00

Foreign Currency Balances

Adjusting Entries for Foreign Currency Balances

Chocolate De-lites imports and exports chocolate delicacies. Some transactions are denominated in U.S. dollars and others in foreign currencies. A summary of accounts receivable and accounts payable on December 31, 20X6, before adjustments for the effects of changes in exchange rates during 20X6, follows:

Accounts receivable:

  

In U.S. dollars

$164,000

In 475,000 Egyptian pounds (E£)

$ 73,600

Accounts payable:

  

In U.S. dollars

$ 86,000

In 21,000,000 yen (Â¥)

$175,300

The spot rates on December 31, 20X6, were

E£1=$0.176

Â¥1=$0.0081

The average exchange rates during the collection and payment period in 20X7 are

E£1=$0.18

Â¥1=$0.0078

Required

a. Prepare the adjusting entries on December 31, 20X6.

b. Record the collection of the accounts receivable in 20X7.

c. Record the payment of the accounts payable in 20X7.

d. What was the foreign currency gain or loss on the accounts receivable transaction denominated in E£ for the year ended December 31, 20X6? For the year ended December 31, 20X7? Overall for this transaction?

e. What was the foreign currency gain or loss on the accounts receivable transaction denominated in ¥? For the year ended December 31, 20X6? For the year ended December 31, 20X7? Overall for this transaction?

f. What was the combined foreign currency gain or loss for both transactions? What could Chocolate De-lites have done to reduce the risk associated with the transactions denominated in foreign currencies?

 

 


Answers

Maurice Tutor
(5)
Status NEW Posted 19 Jan 2018 11:01 PM My Price 9.00

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