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Module 1 Problems and Exercises 1 Questions

This document provides 6 problems related to accounting for international transactions. The problems involve purchases and sales of inventory from foreign suppliers and to foreign customers. Journal entries are required for the years 2021 and 2022 based on given exchange rates on relevant transaction dates. Solutions to the problems would involve debiting/crediting appropriate accounts like Inventory, Accounts Payable, Sales, and Foreign Exchange Gain/Loss based on the terms and exchange rates provided.

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Rafael Capunpon Vallejos
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© © All Rights Reserved
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377 views

Module 1 Problems and Exercises 1 Questions

This document provides 6 problems related to accounting for international transactions. The problems involve purchases and sales of inventory from foreign suppliers and to foreign customers. Journal entries are required for the years 2021 and 2022 based on given exchange rates on relevant transaction dates. Solutions to the problems would involve debiting/crediting appropriate accounts like Inventory, Accounts Payable, Sales, and Foreign Exchange Gain/Loss based on the terms and exchange rates provided.

Uploaded by

Rafael Capunpon Vallejos
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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UNIVERSITY OF THE EAST – Caloocan

College of Business Administration


Department of Accountancy, Business Law and Taxation
International Accounting (BSA 3106)
Module 1 – Problems and Exercises (1)

Name: _________________________________________________Yr. and Section: ____________________


Instructions: In the following questions, provide the best answer that corresponds to the question.
Provide solutions in good form.

Part I – Problems

Problem 1. B Company purchased inventory from N Company, a foreign supplier, on November 15,
2021 for ¥100,000, when the spot rate was P0.4295. On December 31, 2021, the spot rate was
P0.4245. B Company settled the account on January 15, 2022 when the spot rate was P0.4345.

Required:
Provide the journal entries in 2021 and 2022.

Problem 2. On November 15, 2021, L Company ordered merchandise, on an FOB Shipping Point term,
from a foreign entity for 200,000 marks. The merchandise was shipped and invoiced to L Company on
December 10, 2021. L Company paid the invoice on January 10, 2022. The spot rates are as follows:

November 15, 2021 P 22.4955


December 10, 2021 22.4875
December 31, 2021 22.4675
January 10, 2022 22.4475

Required:
Provide the journal entries in 2021 and 2022.

Problem 3. On September 1, 2021, C Company sold merchandise to a foreign entity for 250,000 francs.
Terms of the sale require payment in francs on February 1, 2022. On September 1, 2021, the spot
exchange rate was P1.20 per franc. At December 31, 2021, the spot rate was P1.19, but the rate
increased to P1.22 by February 1, 2022, when payment was received.

Required:
Provide the journal entries in 2021 and 2022.

Problem 4. On November 1, 2021, P Company received a sale order for equipment from G Company, a
foreign entity, for 300,000 foreign currency units (FCU) when the local currency unit (LCU)
equivalent was 96,000 LCU’s. P Company shipped the equipment on December 1, 2021, and billed the
customer for 300,000 FCU’s when the local currency unit equivalent was 100,000 LCU’s. On
December 31, 2021, the local currency unit equivalent of the 300,000 FCU’s was 103,000 LCU’s. P
Company received the payment on January 6, 2022 when the local currency unit equivalent of the
300,000 FCU’s was 105,000 LCU’s.

Required:
Provide the journal entries in 2021 and 2022.

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Problem 5. M Company acquired inventory from a foreign entity for 100,000 FCU’s (foreign currency
units). The term is FOB Shipping Point. Relevant information is presented below:

Date Particulars Exchange Rates (1 FCU to LCU’s)


December 1, 2021 Placement of order 13.70 LCU’s
December 22, 2021 Date of shipment 13.75
December 31, 2021 End of reporting period 13.80
January 8, 2022 Settlement date 13.50

Required: Compute the following for P Company


a. How much accounts payable is initially recognized from the transaction?
b. How much is the foreign exchange gain (loss) is recognized in M Company’s 2021 statement of
profit or loss?
c. How much inventory from the transaction is included in M Company’s 2021 statement of
financial position?
d. How much accounts payable from the transaction is included in M Company’s 2021 statement
of financial position?
e. How much is the foreign exchange gain (loss) is recognized in M Company’s 2022 statement of
profit or loss?
f. How much is the total foreign exchange gain (loss) recognized from the transaction?

Problem 6. On November 29, 2021, ABC Company placed a non-cancellable purchase order with a
company based in France to import a machine for €10,000. The contract term is FOB Shipping point.
The machine was shipped on December 1, 2021, and was received by ABC Company on December 15,
2021. The purchase price was settled on January 3, 2022.

The following are the exchange rates:


November 29, 2021 P55: €1
December 1, 2021 P58: €1
December 15, 2021 P57: €1
December 31, 2021 P60: €1
January 3, 2022 P61: €1

Required:
Provide the journal entries in 2021 and 2022.

“That in all things, GOD maybe glorified”

“Hear; for I will speak of excellent things; and the opening of my lips shall be right things” Proverbs 8:16

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