ACC 405
Module 4 Project
Practice Problems and Solutions
Southern New Hampshire University
, lOMoARcPSD|51648332
ACC-405
Module 4 Practice Problems and Solutions
Problem 1. Selco, a U.S. Company, imports and exports tools, shop equipment, and industrial
construction supplies. The company uses a periodic inventory system. During April the company entered
into the following transactions. All rate quotations are direct exchange rates.
April 3 - Purchased power tools from a wholesaler in Japan, on account, at an invoice cost of 1,600,000
yen. On this date the exchange rate for the yen was $.0072.
April 5 - Sold hand tools on credit that were manufactured in the U.S. to a retail outlet located in West
Germany. The invoice price was $2,800. The exchange rate for euros was $0.0322.
April 9 - Sold electric drills on account to a retailer in New Zealand. The invoice price was 16,800 U.S.
dollars and the exchange rate for the New Zealand dollar was $.76.
April 11 - Purchased drill bits on account from a manufacturer located in Belgium. The billing was for
801,282 euros. The exchange rate for euro was $.0312.
April 16 - Paid 1,000,000 yen on account to the wholesaler for purchases made on April 3. The exchange
rate on this date was $.0067.
April 18 - Settled the accounts payable with the Belgium manufacturer. The exchange rate was $.0368.
April 22 - Received full payment from the New Zealand retailer. The exchange rate was $.74.
April 30 - Completed payment on the April 3 purchase. The exchange rate for yen was $.0078.
Required:
Prepare journal entries on the books of Selco to record the transactions listed above.
Answer
Apr. 3 Purchases 11,520
Accounts Payable (1,600,000 x $.0072) 11,520
5 Accounts Receivable 2,800
Sales 2,800
9 Accounts Receivable 16,800
Sales 16,800
11 Purchases 25,000
Accounts Payable (801,282 x $.0312) 25,000
16 Accounts Payable (1,000,000 x $.0072) 7,200
Transaction Gain 500
Cash (1,000,000 x $.0067) 6,700
18 Accounts Payable 25,000
Transaction Loss 4,487
Cash (801,282 x $.0368) 29,487
22 Cash 16,800
Accounts Receivable 16,800
Downloaded by Benjamin Luca ()
, lOMoARcPSD|51648332
30 Accounts Payable (600,000 x $.0072) 4,320
Transaction Loss 360
Cash (600,000 x $.0078) 4,680
Problem 2. Crystal Exporting Co. is a U.S. wholesaler engaged in foreign trade. The following
transactions are representative of its business dealings. The company uses a periodic inventory system
and is on a calendar-year basis. All exchange rates are direct quotations.
Crystal Exporting purchased merchandise from Chang’s Ltd., a Hong Kong
manufacturer. The invoice was for 210,000 Hong Kong dollars, payable on
April 1. On this same date, Crystal Exporting acquired a forward contract to
Dec. 1 buy 210,000 Hong Kong dollars on April 1 for $.1314.
Crystal Exporting sold merchandise to Zintel Retailers for 120,000 Hong
Dec. 29 Kong dollars, receivable in 90 days. No hedging was involved.
April 1 Crystal Exporting received 120,000 Hong Kong dollars from Zintel Retailers.
Crystal Exporting submitted full payment of 210,000 Hong Kong dollars to
Chang’s, Ltd., after obtaining the 210,000 Hong Kong dollars on its forward
April 1 contract.
Spot rates and the forward rates for the Hong Kong dollar were as follows:
Forwa
rd
Rate
for
April
1
Spot Delive
Rate ry
$0.126 $0.131
Dec. 1
5 4
Dec. 29 0.1240 0.1305
Dec. 31 0.1259 0.1308
Apr. 1 0.1430
Required:
Prepare journal entries for the transactions including the necessary adjustments on December 31.
Answer:
Dec 1 Purchases 26,565
Accounts Payable (210,000 x $.1265) 26,565
1 FC Receivable from Exchange Dealer 27,594
Dollars Payable to Exchange Dealer 27,594
Downloaded by Benjamin Luca ()
Module 4 Project
Practice Problems and Solutions
Southern New Hampshire University
, lOMoARcPSD|51648332
ACC-405
Module 4 Practice Problems and Solutions
Problem 1. Selco, a U.S. Company, imports and exports tools, shop equipment, and industrial
construction supplies. The company uses a periodic inventory system. During April the company entered
into the following transactions. All rate quotations are direct exchange rates.
April 3 - Purchased power tools from a wholesaler in Japan, on account, at an invoice cost of 1,600,000
yen. On this date the exchange rate for the yen was $.0072.
April 5 - Sold hand tools on credit that were manufactured in the U.S. to a retail outlet located in West
Germany. The invoice price was $2,800. The exchange rate for euros was $0.0322.
April 9 - Sold electric drills on account to a retailer in New Zealand. The invoice price was 16,800 U.S.
dollars and the exchange rate for the New Zealand dollar was $.76.
April 11 - Purchased drill bits on account from a manufacturer located in Belgium. The billing was for
801,282 euros. The exchange rate for euro was $.0312.
April 16 - Paid 1,000,000 yen on account to the wholesaler for purchases made on April 3. The exchange
rate on this date was $.0067.
April 18 - Settled the accounts payable with the Belgium manufacturer. The exchange rate was $.0368.
April 22 - Received full payment from the New Zealand retailer. The exchange rate was $.74.
April 30 - Completed payment on the April 3 purchase. The exchange rate for yen was $.0078.
Required:
Prepare journal entries on the books of Selco to record the transactions listed above.
Answer
Apr. 3 Purchases 11,520
Accounts Payable (1,600,000 x $.0072) 11,520
5 Accounts Receivable 2,800
Sales 2,800
9 Accounts Receivable 16,800
Sales 16,800
11 Purchases 25,000
Accounts Payable (801,282 x $.0312) 25,000
16 Accounts Payable (1,000,000 x $.0072) 7,200
Transaction Gain 500
Cash (1,000,000 x $.0067) 6,700
18 Accounts Payable 25,000
Transaction Loss 4,487
Cash (801,282 x $.0368) 29,487
22 Cash 16,800
Accounts Receivable 16,800
Downloaded by Benjamin Luca ()
, lOMoARcPSD|51648332
30 Accounts Payable (600,000 x $.0072) 4,320
Transaction Loss 360
Cash (600,000 x $.0078) 4,680
Problem 2. Crystal Exporting Co. is a U.S. wholesaler engaged in foreign trade. The following
transactions are representative of its business dealings. The company uses a periodic inventory system
and is on a calendar-year basis. All exchange rates are direct quotations.
Crystal Exporting purchased merchandise from Chang’s Ltd., a Hong Kong
manufacturer. The invoice was for 210,000 Hong Kong dollars, payable on
April 1. On this same date, Crystal Exporting acquired a forward contract to
Dec. 1 buy 210,000 Hong Kong dollars on April 1 for $.1314.
Crystal Exporting sold merchandise to Zintel Retailers for 120,000 Hong
Dec. 29 Kong dollars, receivable in 90 days. No hedging was involved.
April 1 Crystal Exporting received 120,000 Hong Kong dollars from Zintel Retailers.
Crystal Exporting submitted full payment of 210,000 Hong Kong dollars to
Chang’s, Ltd., after obtaining the 210,000 Hong Kong dollars on its forward
April 1 contract.
Spot rates and the forward rates for the Hong Kong dollar were as follows:
Forwa
rd
Rate
for
April
1
Spot Delive
Rate ry
$0.126 $0.131
Dec. 1
5 4
Dec. 29 0.1240 0.1305
Dec. 31 0.1259 0.1308
Apr. 1 0.1430
Required:
Prepare journal entries for the transactions including the necessary adjustments on December 31.
Answer:
Dec 1 Purchases 26,565
Accounts Payable (210,000 x $.1265) 26,565
1 FC Receivable from Exchange Dealer 27,594
Dollars Payable to Exchange Dealer 27,594
Downloaded by Benjamin Luca ()
