Homestyle Brands imports materials from other countries and exports finished pro

Question

Homestyle Brands imports materials from other countries and exports finished products to customers throughout the world. Information regarding four such transactions occurring in the last accounting period, all denominated in units of foreign currency, is given below: Country Amount Spot Rate at Transaction Date Spot Rate at Payment Date 1. Import from Taiwan 100,000 T dollars $0.033 $0.038 2. Import from Poland 600,000 zloty 0.300 0.285 3. Export to Brazil 400,000 reals 0.421 0.403 4. Export to Switzerland 950,000 Swiss francs 1.050 1.084 Required Prepare the journal entries made by Homestyle Brands to record the above events on the transaction date and on the payment date.

Import Transaction 1

Import Transaction 2

Export Transaction 3

Export Transaction 4

Explanation / Answer

Particulars

Debit

Credit

Import from Taiwan:

Purchases                           

3300

To Accounts Payable (100000*0.033)

3300

Accounts Payable

3300

Foreign Exchange Loss

500

To Cash (100000*0.038)

3800

Import from Poland:

Purchases                           

180000

To Accounts Payable (600000*0.300)

180000

Accounts Payable

180000

To Cash (600000*0.285)

171000

To Foreign Exchange Gain

9000

Export to Brazil:

Accounts Receivable (400000*0.421)

168400

To Sales

168400

Cash (400000*0.403)

161200

Foreign Exchange Loss

7200

To Accounts Receivable

168400

Export to Switzerland:

Accounts Receivable (950000*1.050)

997500

To Sales

997500

Cash (950000*1.084)

1029800

To Accounts Receivable

997500

To Foreign Exchange Gain

32300

Particulars

Debit

Credit

Import from Taiwan:

1. On Transaction date:

Purchases                           

3300

To Accounts Payable (100000*0.033)

3300

1. On Payment date:

Accounts Payable

3300

Foreign Exchange Loss

500

To Cash (100000*0.038)

3800

Import from Poland:

1. On Transaction date:

Purchases                           

180000

To Accounts Payable (600000*0.300)

180000

1. On Payment date:

Accounts Payable

180000

To Cash (600000*0.285)

171000

To Foreign Exchange Gain

9000

Export to Brazil:

1. On Transaction date:

Accounts Receivable (400000*0.421)

168400

To Sales

168400

1. On Payment date:

Cash (400000*0.403)

161200

Foreign Exchange Loss

7200

To Accounts Receivable

168400

Export to Switzerland:

1. On Transaction date:

Accounts Receivable (950000*1.050)

997500

To Sales

997500

1. On Payment date:

Cash (950000*1.084)

1029800

To Accounts Receivable

997500

To Foreign Exchange Gain

32300

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