Question

P8.1 Import/Export Transactions Papa Pete's International is a U.S.food distributor that buys and sells several non-U.S. currencies. Below is a summary of transactions occurring in 2020. Sales to Canadian customers, totaling C$1.000.000 occurred when the exchange rate was $0.73/CS C$200,000 was for cash, but C$700,000 was paid by 15 for cash, but C$700,000 was paid by customers when the rate was $0.724/CS. Th remainder is unpaid at year-end, when the rate is $0.722/C$. • Sales to Italian customers, totaling €10.000.000. occurred when the exchange rate was $1.17/€. The company was paid €8,000,000 when the rate was $1.185. The remainder is unpaid at year-end, whe the rate is $1.188. Purchases from Mexican suppliers, totaling Mex$3,000,000, occurred when the exchange rate wa $0.055/Mex$. The company paid the suppliers Mex$2,700,000 when the rate was $0.0582/Mex$. The remainder is unpaid at year-end, when the rate is $0.0588/Mex$. Mex$2,800,000 of the merchandi was sold by Papa Pete's during 2020. • Purchases from Hong Kong suppliers, totaling HK$4,000,000, occurred when the exchange rate $0.139/HK$. The company paid the suppliers HK$3,400,000 when the rate was $0.133/HK$, and the remainder is unpaid at year-end, when the rate is $0.131/HK$. HK$3,600,000 of this merchandise sold by Papa Pete's during 2020. Required Calculate the following amounts, appearing in Papa Pete's 2020 financial statements, related to the above information. Show calculations clearly. a. Accounts receivable and accounts payable, end of 2020 b. Sales revenue for 2020 c. Cost of goods sold for 2020 d. Inventory balance, end of 2020 e. Exchange gain or loss for 2020

Answer 1

Sales to Canadian Customer (c$)	10,00,000
Exchange rate ($/c$)	0.73
Sales to Italian Customer Euro	1,00,00,000
Exchange rate ($/Euro)	1.17
Sales to Canadian	Amount ( $)
Sale Price * Exchange rate	7,30,000
1000000*0.73
Sales to Italian Customer Euro	1,17,00,000
Sale Price * Exchange rate
10000000*1.17
Total Sales 2020	1,24,30,000

Answer b )

	Calculation Basis	Amount (Mex$)			Calculation Basis	Amount (Mex$)
Purchase from Mexician (Mex$)	30,00,000	30,00,000		Purchase from Hingkong (HK$)	40,00,000	40,00,000
Exchange rate ($/Mex$)	0.0550			Exchange rate ($/HK$)	0.1390
Paid ( Mex$)		27,00,000		Paid ( hk$)		34,00,000
Exchange rate ($/Mex$)	0.0582			Exchange rate ($/HK$)	0.1330
Unpaid		3,00,000		Unpaid		6,00,000
Exchange rate ($/Mex$)	0.0588			Exchange rate ($/HK$)	0.1310
Sold ( Mex$)		28,00,000		Sold ( HK$)		36,00,000
Closing Stock	3000000-2800000	2,00,000		Closing Stock	4000000-3600000	4,00,000
		Amount ($)
Cost Of Good Sold		1,54,000
Purchase from Mexican (Mex$)	28,00,000
Exchange rate ($/Mex$)	0.0550
	2800000*0.055
Cost Of Good Sold		5,00,400
Purchase from HongKong (HK$)	36,00,000
Exchange rate ($/HK$)	0.1390
	3600000*0.139
Cost Of Good Sold- Total		6,54,400
		Amount ($)
Inventory Balance		11,000.00
From Mexican	2,00,000
Exchange rate ($/Mex$)	0.0550
	200000*0.055
From Hong Kong	4,00,000
Exchange rate ($/Mex$)	0.1390
	400000*0.1390
Inventory Balance		55,600.00
Inventory- Total		66,600.00
( All Inventory closing balance number as calculated above - Mexican+ Hong Kong

Detail calculation of Net Gain on all above transaction :

Exchange Gain /Loss		Amount ($)
Sales to Canadian Customer (c$)	10,00,000
Exchange rate ($/c$)	0.73
balance amount paid (c$)	7,00,000
Exchange rate ($/c$)	0.72
Loss at the time of cash received	700000*(0.724-0.73)	-4,200.00
Loss at Closing Balance (derived number )	1,00,000
Exchange rate ($/c$)	0.722
Loss at Closing Balance	100000*(0.722-0.73)	-800
Sales to Italian Customer Euro	1,00,00,000
Exchange rate ($/Euro)	1.17
balance amount paid (Euro)	80,00,000
Exchange rate ($/Euro)	1.185
Gain at the time of cash received	8000000*(1.185-1.17)	1,20,000
Gain at Closing Balance (derived number )	20,00,000
Exchange rate ($/Euro)	1.188
Gain at Closing Balance	2000000*(1.188-1.17)	36,000
Purchase from Mexican (Mex$)	30,00,000
Exchange rate ($/Mex$)	0.0550
Paid ( Mex$)	27,00,000
Exchange rate ($/Mex$)	0.0582
Loss at the time of Payment	2700000*(0.0550-0.0582)	-8640
Cloisng Creditors( Derived)	3,00,000.00
Exchange rate ($/Mex$)	0.0588
Loss at Closing Creditor	300000*(0.055-0.0588)	-1140
Purchase from Hingkong (HK$)	40,00,000
Exchange rate ($/HK$)	0.1390
Paid ( hk$)	34,00,000
Exchange rate ($/HK$)	0.1330
Gain at the time of Payment	3400000*(0.139-0.133)	20400
Closing Creditors( Derived)	6,00,000.00
Exchange rate ($/HK$)	0.1310
Gain at Closing Creditor	600000*(0.139-0.1310)	4800
Net Gain		166420

In certain cases , I highlighted as derived number ., please see below workings for the same

	Calculation Basis	Amount ( C$)
Sales to Canadian Customer (c$)	10,00,000	10,00,000
Exchange rate ($/c$)	0.73
Cash collected (c$)		2,00,000
balance amount paid (c$)	7,00,000	7,00,000.00
Exchange rate ($/c$)	0.72
Collected
balance amount ( derived Number)		1,00,000

	Calculation Basis	Amount (Euro)
Sales to Italian Customer Euro	1,00,00,000	1,00,00,000
Exchange rate ($/Euro)	1.17
Company Paid		80,00,000
Exchange rate (Euro)	1.185
Collected
balance amount ( derived Number)		20,00,000

	Calculation Basis	Amount (Mex$)
Purchase from Mexician (Mex$)	30,00,000	30,00,000
Exchange rate ($/Mex$)	0.0550
Paid ( Mex$)		27,00,000
Exchange rate ($/Mex$)	0.0582
Unpaid - derived Number		3,00,000

	Calculation Basis	Amount (Mex$)
Purchase from Hongkong (HK$)	40,00,000	40,00,000
Exchange rate ($/HK$)	0.1390
Paid ( hk$)		34,00,000
Exchange rate ($/HK$)	0.1330
Unpaid - derived Number		6,00,000