I am having trouble with exchange rates. please help guide me with these questio

Question

I am having trouble with exchange rates. please help guide me with these questions

Global Motors is a US. corporation that purchases automobles from European manufacturers for distribution in the Uinited States. A recent purchase Involved the following events: Nov.12 Purchased automobiles from Stockholn Motors in Suedish kronor for skze,eee,oae, payable in 68 days. Current exchange nate, s0.1286 per krona. (Global uses the perpetual inventory systen.) Dec. 31 Hade year-end adjusting entry relating to the Sk20,00e,000 account payable to Stockhol-Hot ors, current exchange rate, 50.1288 per krona 3an.11 Issued a check to World Bank for $2,566,800 in full paysent of the account payable to StockhoIn Hotors. Required: o. Prepare in general journal form the entries necessary to record the preceding events. b. Compute the exchange rate (price) of the krona in U.S. dollars on January 11. Complete this question by entering your answers in the tabs below Required A Required B Prepare in general journal form the entries necessary to record the preceding events. (If no entry is required for a particular transaction, select "No journal entry required" in the farst account field.) View transaction list View journal entry worksheet DebitCredit General Journal No Date Nov 12 Inventory Accounts payabie Next >

Explanation / Answer

Ans-

No. Date General Journal Debit Credit

1 Nov 12 Inventory 2,572,000

Accounts Payable(Stockholm Motors) 2,572,000

To record purchase of automobiles Stockholm motors for Sk20,000,000 when exchange rate is $0.1286 per krona Sk 20,000,000*0.1286=2,572,000

2- Dec 31 Loss on fluctuations in Foreign Exchange Rates 4,000

Account Payable( Stockholm Motors) 4,000

(To adjust balance of sk 20,000,000, differenece between exchange rate nov 12 0.1286 per krona- dec 31 0.1288 per krona=0.0002, now loss on fluctuations in Foreign Exchange Rates= 0.0002*20,000,000=$4000

3- Jan 11 Accounts Payable(Stockholm Motors) 2,576,000

(2,572,000+4000=2,576,000)

Cash 2,566,800

Gain on fluctuations in Foreign Exchange Rates(B/F) 9,200

(To record payment of Sk 20,000,000 Account)

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