Coyote Corp. a U.S. company in Texas had the following series of transactions in a foreign...
Question:
Coyote Corp. a U.S. company in Texas had the following series of transactions in a foreign country during 2013.
March 1 bought inventory costing 60,000 pesos on credit
May 1 sold 60% of the inventory for 54,000 pesos on credit
Aug 1 collected 48,000 pesos from customers
Sept 1 paid 36,000 pesos to creditors on March 1
Exchange rate:
$.20 = 1 peso May 1 $.22 = 1 peso Aug 1 $.23 = 1 peso Sept 1 $.24 = 1 peso Dec 31 $.25 = 1 peso
Prepare all journal entries in U.S. dollars along with any Dec 31 adjusting entries. Coyote uses a perpetual inventory system.
Foreign exchange
Foreign exchange transactions are those transactions in which both the parties belong to different countries. Everything about these transactions are same as those of regular ones except one which is that if the billing is done in foreign currency then all the accounts related to the transaction needs to be revalued at each reporting date, international accounting standard 21 prescribe the Procedures.
Answer and Explanation: 1
Journal entries in coyote corp
March 1st
Purchase (60000 peso * $0.20) Dr. $12000
Accounts payable(60000 pesos) Cr $12000
( being goods purchased on credit)
May 1st
Accounts receivable (54000 pesos) Dr 11880
Sales revenue (54000 pesos * $0.22) Cr. $11880
( being goods sold)
August 1st
Cash ( 48000 pesos * $0.23) Dr. $11040
Accounts receivable (48000 pesos * $0.22) Cr. $10560
Foreign exchange difference Cr $480
( being cash received)
September 1st
Accounts payable (36000 pesos * $0.20) Dr. $7200
Foreign exchange difference Dr. $1440
Cash (36000 * 0.24) Cr $8640
( being amount paid)
December 31st
Accounts payable (24000 pesos * $0.20) $ 4800
Foreign exchange difference Dr. $1200
Accounts payable (24000 pesos * $0.25) $6000
( being foreign exchange transaction revalued)
Accounts receivable (6000 pesos * $0.25) Dr. $1500
Foreign exchange difference Cr. $180
Accounts receivable Cr (6000 pesos * $0.22) Cr. $1320
( being account receivable revalued)
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