International accounting

(from the book”modern

advanced accounting first
Egyptian Edition”)
Section No.(2) On chapter11
International accounting standards : accounting for
foreign currency Transaction
Prepared by
Eslam Mohamed Refat
Teaching Assistant
Accounting department
Faculty of commerce
Sadat city Unviersity
 (Exercise 11.3)
Walker, Inc., a U.S. corporation that prepares
annual financial statements, ordered a machine
(plant asset) from Pfau Company of Germany on
July 15, 2019, for –C100,000 when the selling spot
rate for the euro was $1.065. Pfau shipped the
machine on September 1, 2019 ,and billed Walker
for C 100000.the selling spot rate was $1.070 on
that date. Walker acquired a draft for –C100, 000
and paid the invoice on October 25, 2019, when the
selling spot rate for the euro was $1.065.
• Instructions:-
• Prepare journal entries for Walker, Inc.,
to record the foregoing business
transactions and events.
Solution
Journal entries for Walker, Inc.:
No Entry
Machinery 107,000
(C100,000 x $1.070) 107,000
Trade Accounts Payable
(To record acquisition of
machine from Pfau Company
for C100,000, translated at
selling spot rate).
Trade Accounts Payable 107,000
Cash 106,500
(C100,000 x $1.065)
Foreign Currency Transaction 500
Gains
)To record payment of
C100,000 to Pfau Company
and recognition of transaction
gain(.
 (Exercise 11.4)
• On November 18, 2019, U.S. Company, which uses
the perpetual inventory system and prepares
financial statements monthly, shipped merchandise
costing $1,000 to France Company for –C1,500,
terms n/30. On December 18, 2019, U.S. Company
received from France Company a draft for –C1,500,
which U.S. converted to U.S. dollars immediately .
Spot rates for the euro were as follows:-
–C1= –C1=
Buying Rate Selling Rate
• Nov. 18, 2019 $1.055 $1.060
• Nov. 30, 2019 1.060 1.050
• dec. 18, 2019 1.050 1.055
Instructions:-
• Prepare journal entries for U.S. Company on
November 18 and 30 and December 18, 2019 . Omit
explanations for the journal entries.
 Solution
Journal entries for U.S. Company:
Nov. 18, 2019 Trade Accounts Receivable 1,583
(C1,500 x $1.055)
Sales 1,583
1,000
Cost of Goods Sold
Inventories
1,000
Nov. 30, 2019 Trade Accounts Receivable
(C1,500 x ($1.060 – $1.055)] 8
Foreign Currency Transaction 8
Gains

Dec. 18, 2019 Cash (C1,500 x $1.050) 1,575

Foreign Currency Transaction 16
Losses
Trade Accounts Receivable 1,591
($1,583 + $8)
 (Exercise 11.5)
• On March 25, 2019, Cairo Company sold merchandise
costing L.E260,000 to Svenska Company, a Russian
enterprise, for 2,000,000 Russian Rouble(RUB) on 30-day
open account. On April 24, 2019, Cairo received a RUB
2,000,000 draft from Svenska and converted it to Egyptian
pounds. Cairo prepares monthly financial statements and
uses the perpetual inventory system. Exchange rates for the
Russian Rouble were as follows:-
RUB = RUB = RUB =
Buying selling forward
• Mar 25 , 2019 L.E0.19 L.E0.20 L.E 0.22
• Mar 31 , 2019 0.20 0.22 0.24
• Apr 24 , 2019 0.18 0.19 0.20
Instructions:-
Prepare journal entries (omit
explanations) for Cairo Company on
March 25, March 31, and April 24,
2019