Chow Co. purchased rice from China for 100,000 renminbi (r) on Nov. 1, 2013. Payment is due on Jan. 30, 2014. The rates were as follows:
Date Spot Rate (DER) Nov. 1, 2013 $0.120 Dec 31, 2013 $0.124 Jan. 30, 2014 $0.127
Record all journal entries on the transaction, balance sheet and settlement dates. Show computations.
Homework Answers
| Date | Account title and Explanation | Debit | Credit |
| Nov 1,2013 | Inventory [100,000 x $0.120] | $12,000 | |
| Accounts payable | $12,000 | ||
| [To record purchases on account] | |||
| Dec 31,2013 | Transaction loss* | $400 | |
| Accounts payable | $400 | ||
| [To record foreign currency transaction loss] | |||
| Jan 30,2014 | Accounts payable | $12,400 | |
| Transaction loss | $300 | ||
| Cash [100,000 x $0.127] | $12,700 | ||
| [To record cash paid for accounts payable] |
*Calculations:
| Payable in US dollars at Dec 31,2013 [100,000 x $0.124] | $12,400 |
| Balance in Accounts payable | ($12,000) |
| Transaction loss | $400 |
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Chow Co. purchased rice from China for 100,000 renminbi (r) on Nov. 1, 2013.
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