ACC 405
Module 5 Project
Practice Problems and Solutions
Southern New Hampshire University
, ACC 405 Module 5 Practice Problems
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
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 $0.0072.
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 $1.25.
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 $0.76.
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 $1.26.
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 $0.0067.
April 18 – Settled the accounts payable with the Belgium manufacturer. The exchange rate was
$1.28.
April 22 – Received full payment from the New Zealand retailer. The exchange rate was $0.74.
April 30 – Completed payment on the April 3 purchase. The exchange rate for yen was $0.0078.
Required: Prepare journal entries on the books of Selco to record the transactions listed above.
Date Account Debit Credit
Apr. 3 Purchases 11,520
Accounts Payable (1,600,000 × $0.0072) 11,520
Apr. 5 Accounts Receivable 2,800
Sales 2,800
Apr. 9 Accounts Receivable 16,800
Sales 16,800
Apr. 11 Purchases 25,000
Accounts Payable (801,282 × $0.0312) 25,000
Apr. 16 Accounts Payable (1,000,000 × $0.0072) 7,200
Transaction Gain 500
Cash (1,000,000 × $0.0067) 6,700
Apr. 18 Accounts Payable 25,000
Transaction Loss 4,487
Cash (801,282 × $0.0368) 29,487
Apr. 22 Cash 16,800
Accounts Receivable 16,800
Apr. 30 Accounts Payable (600,000 × $0.0072) 4,320
Transaction Loss 360
Cash (600,000 × $0.0078) 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.
, Dec. 1 – 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 buy 210,000 HKD on April 1 for $0.1314.
Dec. 29 – Sold merchandise to Zintel Retailers for 120,000 HKD, receivable in 90 days. No
hedging was involved.
Apr. 1 – Received 120,000 HKD from Zintel Retailers.
Apr. 1 – Submitted full payment of 210,000 HKD to Chang’s Ltd., after obtaining the 210,000 HKD
on its forward contract.
Spot rates and forward rates for the Hong Kong dollar were as follows:
Date Spot Rate Forward Rate
Dec. 1 $0.1265 $0.1314
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 Dec. 31.
Date Account Debit Credit
Dec. 1 Purchases 26,565
Accounts Payable (210,000 × $0.1265) 26,565
Dec. 1 FC Receivable from Exchange Dealer 27,594
Dollars Payable to Exchange Dealer (210,000 × $0.1314) 27,594
Dec. 29 Accounts Receivable (120,000 × $0.1240) 14,880
Sales 14,880
Dec. 31 Accounts Payable 126
Transaction Gain [(210,000 × $0.1259) – $26,565] 126
Dec. 31 Transaction Loss 126
FC Receivable from Exchange Dealer 126
[(210,000 × $0.1308) – $27,594]
Dec. 31 Accounts Receivable 228
Transaction Gain [(120,000 × $0.1259) – $14,880] 228
Apr. 1 Cash (120,000 × $0.1430) 17,160
Accounts Receivable 15,108
Transaction Gain 2,052
Apr. 1 Transaction Loss 3,591
Accounts Payable [(210,000 × $0.1430) – (210,000 × $0.1308)] 3,591
Apr. 1 FC Receivable from Exchange Dealer 2,562
Transaction Gain [(210,000 × $0.1430) – (210,000 × $0.1308)] 2,562
Apr. 1 Investment in FC 30,030
Dollars Payable to Exchange Dealer 27,594
Cash 27,594
FC Receivable from Exchange Dealer 30,030
Apr. 1 Accounts Payable 30,030
Investment in Foreign Currency 30,030
Module 5 Project
Practice Problems and Solutions
Southern New Hampshire University
, ACC 405 Module 5 Practice Problems
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
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 $0.0072.
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 $1.25.
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 $0.76.
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 $1.26.
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 $0.0067.
April 18 – Settled the accounts payable with the Belgium manufacturer. The exchange rate was
$1.28.
April 22 – Received full payment from the New Zealand retailer. The exchange rate was $0.74.
April 30 – Completed payment on the April 3 purchase. The exchange rate for yen was $0.0078.
Required: Prepare journal entries on the books of Selco to record the transactions listed above.
Date Account Debit Credit
Apr. 3 Purchases 11,520
Accounts Payable (1,600,000 × $0.0072) 11,520
Apr. 5 Accounts Receivable 2,800
Sales 2,800
Apr. 9 Accounts Receivable 16,800
Sales 16,800
Apr. 11 Purchases 25,000
Accounts Payable (801,282 × $0.0312) 25,000
Apr. 16 Accounts Payable (1,000,000 × $0.0072) 7,200
Transaction Gain 500
Cash (1,000,000 × $0.0067) 6,700
Apr. 18 Accounts Payable 25,000
Transaction Loss 4,487
Cash (801,282 × $0.0368) 29,487
Apr. 22 Cash 16,800
Accounts Receivable 16,800
Apr. 30 Accounts Payable (600,000 × $0.0072) 4,320
Transaction Loss 360
Cash (600,000 × $0.0078) 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.
, Dec. 1 – 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 buy 210,000 HKD on April 1 for $0.1314.
Dec. 29 – Sold merchandise to Zintel Retailers for 120,000 HKD, receivable in 90 days. No
hedging was involved.
Apr. 1 – Received 120,000 HKD from Zintel Retailers.
Apr. 1 – Submitted full payment of 210,000 HKD to Chang’s Ltd., after obtaining the 210,000 HKD
on its forward contract.
Spot rates and forward rates for the Hong Kong dollar were as follows:
Date Spot Rate Forward Rate
Dec. 1 $0.1265 $0.1314
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 Dec. 31.
Date Account Debit Credit
Dec. 1 Purchases 26,565
Accounts Payable (210,000 × $0.1265) 26,565
Dec. 1 FC Receivable from Exchange Dealer 27,594
Dollars Payable to Exchange Dealer (210,000 × $0.1314) 27,594
Dec. 29 Accounts Receivable (120,000 × $0.1240) 14,880
Sales 14,880
Dec. 31 Accounts Payable 126
Transaction Gain [(210,000 × $0.1259) – $26,565] 126
Dec. 31 Transaction Loss 126
FC Receivable from Exchange Dealer 126
[(210,000 × $0.1308) – $27,594]
Dec. 31 Accounts Receivable 228
Transaction Gain [(120,000 × $0.1259) – $14,880] 228
Apr. 1 Cash (120,000 × $0.1430) 17,160
Accounts Receivable 15,108
Transaction Gain 2,052
Apr. 1 Transaction Loss 3,591
Accounts Payable [(210,000 × $0.1430) – (210,000 × $0.1308)] 3,591
Apr. 1 FC Receivable from Exchange Dealer 2,562
Transaction Gain [(210,000 × $0.1430) – (210,000 × $0.1308)] 2,562
Apr. 1 Investment in FC 30,030
Dollars Payable to Exchange Dealer 27,594
Cash 27,594
FC Receivable from Exchange Dealer 30,030
Apr. 1 Accounts Payable 30,030
Investment in Foreign Currency 30,030
