29 Jun Make the necessary journal entries for the U.S. firm on July 1 and August 1.
Question
PROBLEM
1. Describe the risks and uncertainty a U.S. company faces when purchasing goods from a foreign corporation and settling the transaction in the foreign currency.
2. On September 15, 20X2, Wall Company, a U.S. firm, purchased a piece of equipment from a foreign firm for 500,000 FCs. Payment for the equipment was to be made in FCs on January 15, 20X3. The spot rates on selected dates were as follows:
Date
Spot
Rate
9/15/X2…………………………..
1
FC =
$0.30
12/31/X2………………………….
1
FC =
$0.33
1/15/X3…………………………..
1
FC =
$0.315
Required:
a. Assuming that the US Corp. has a December 31 year end, prepare the necessary journal entries to account for the series of transactions involving the purchase.
b. Prepare all the necessary journal entries assuming that the US Corp. will be paying for the equipment in U.S. dollars.
3. On November 1, 20X1, DEMO Corp., a U.S. firm, sold merchandise to a foreign firm for 60,000 FCs. DEMO will be paid on January 31, 20X2, in FCs. The spot rates on selected dates were as follows:
Date
Spot
Rate
November 1, 20X1…………………………..
1
FC =
$0.50
December 31, 20X1………………………….
1
FC =
$0.55
January 31, 20X2…………………………..
1
FC =
$0.53
Required:
Assuming that DEMO has a December 31 year end, prepare the necessary journal entries to account for the series of transactions involving the Question
PROBLEM
1. Describe the risks and uncertainty a U.S. company faces when purchasing goods from a foreign corporation and settling the transaction in the foreign currency.
2. On September 15, 20X2, Wall Company, a U.S. firm, purchased a piece of equipment from a foreign firm for 500,000 FCs. Payment for the equipment was to be made in FCs on January 15, 20X3. The spot rates on selected dates were as follows:
Date
Spot
Rate
9/15/X2…………………………..
1
FC =
$0.30
12/31/X2………………………….
1
FC =
$0.33
1/15/X3…………………………..
1
FC =
$0.315
Required:
a. Assuming that the US Corp. has a December 31 year end, prepare the necessary journal entries to account for the series of transactions involving the purchase.
b. Prepare all the necessary journal entries assuming that the US Corp. will be paying for the equipment in U.S. dollars.
3. On November 1, 20X1, DEMO Corp., a U.S. firm, sold merchandise to a foreign firm for 60,000 FCs. DEMO will be paid on January 31, 20X2, in FCs. The spot rates on selected dates were as follows:
Date
Spot
Rate
November 1, 20X1…………………………..
1
FC =
$0.50
December 31, 20X1………………………….
1
FC =
$0.55
January 31, 20X2…………………………..
1
FC =
$0.53
Required:
Assuming that DEMO has a December 31 year end, prepare the necessary journal entries to account for the series of transactions involving the sale.
4. A U.S. Corp. purchased a computer from a French firm on July 1, 20X5, when a Euro cost $0.25. The U.S. firm will be required to pay the French manufacturer 75,000 Euros on August 1, 20X5, when the Euro costs $0.23.
Required:
Make the necessary journal entries for the U.S. firm on July 1 and August 1.
10-13
Chapter 10
omputer from a French firm on July 1, 20X5, when a Euro cost $0.25. The U.S. firm will be required to pay the French manufacturer 75,000 Euros on August 1, 20X5, when the Euro costs $0.23.
Required:
Make the necessary journal entries for the U.S. firm on July 1 and August 1.
10-13
Chapter 10
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