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 Taiwan dollars $0.033 $0.028 2. Import from Poland 600,000 zloty 0.280 0.310 3. Export to Brazil 400,000 reals 0.321 0.358 4. Export to Switzerland 950,000 Swiss francs 1.040 1.007 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 General Journal Description Debit Credit Transaction date: Answer Answer Answer Answer Answer Answer Payment date: Answer Answer Answer Exchange gain Answer Answer Answer Answer Answer

Answer 1

Import Transaction 1:
On Transaction Date:
Debit: Inventory (or Materials) $3,300
Credit: Accounts Payable $3,300
(To record the purchase of materials from Taiwan)

On Payment Date:
Debit: Accounts Payable $2,800
Debit: Exchange Gain $500
Credit: Cash $3,300
(To record the payment for the materials and the exchange gain due to the change in the exchange rate)

Import Transaction 2:
On Transaction Date:
Debit: Inventory (or Materials) $168,000
Credit: Accounts Payable $168,000
(To record the purchase of materials from Poland)

On Payment Date:
Debit: Accounts Payable $186,000
Credit: Cash $186,000
(To record the payment for the materials)

Export Transaction 3:
On Transaction Date:
Debit: Accounts Receivable $128,400
Credit: Sales Revenue $128,400
(To record the sale of finished products to Brazil)

On Payment Date:
Debit: Cash $143,200
Credit: Accounts Receivable $143,200
(To record the receipt of payment for the sale)

Export Transaction 4:
On Transaction Date:
Debit: Cash $988,000
Credit: Sales Revenue $988,000
(To record the sale of finished products to Switzerland)

On Payment Date:
Debit: Accounts Receivable $1,034,650
Debit: Exchange Gain $45,650
Credit: Cash $988,000
(To record the receipt of payment for the sale and the exchange gain due to the change in the exchange rate)