Ex.

8:
On 20/5/2019 An Egyptian company exported goods to a Saudi company for
$ 3,000,000. The Saudi importer will pay for these goods on three equal installments ,
every two months. The accounting period of both the exporter and the importer ended
31/12, and the exchange rate of the American dollar for both the Egyptian pound and the
Saudi riyal was as follows :

Date Egyptian Pound Saudi riyal

20/5/2019 16.50 3.70

20/7/2019 16.60 3.75
20/9/2019 16.65 3.77
20/11/2019 16.40 3.79

Required :
Journal entries in the records of both the exporter and the importer , and show the
A/R a/c , A/P a/c , and the P.-L. change in exchange rate a/c .
Answer
Exporter: Egyptian co.
Importer: Saudi co.
Goods: 3,000,000
 Journal entries in exporter record:
1. Exporting goods at 16.60:
3,000,000 x 16.60 = 49,800,000
Value of installment = 1,000,000 x 16.60 = 16,600,000

20/7 A / R – Saudi Co. 49,800,000

Sales – Foreign currency 49,800,000
2. Collecting first installment:

20/7 cash 16,600,000

A / R – Saudi Co. 16,600,000
 3. Collecting second installment :
1,000,000 x 16.65 = 16,650,000
20/9 Cash 16,650,000
A / R Saudi Co. 16,600,000
P – L change in exchange
rate 50,000

4. Collecting third installment at 16.40

1,000,000 x 16.40 = 16,400,000
20/11 Cash 16,400,000
P – L change in exchange rate 200,000
A / R Saudi Co. 16,600,000
5. Closing
31/12 income summary 150,000
P – L change in exchange rate 150,000

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-Journal entries in the importer's records:
1. Importing goods at 3.75:
3,000,000 x 3.75 = 11,250,000
1.Value of installment = 1000,000 × 3.75 = 3,750,000

20/7 purchases - foreign currency 11,250,000

A / P – Egyptian Co. 11,250,000

2. Paying first installment :

20/7 A / P – Egyptian Co. 3,750,000
Cash 3,750,000

3. paying second installment:

20/9 A / P – Egyptian Co. 3,750,000
P – L change in exchange rate 20,000
Cash 3,770,000
 4. paying third installment :
1,000,000 x 3.79 = 3,790,000
20/11 A / P – Egyptian Co. 3,750,000
P – L change in exchange rate 40,000
Cash 3,790,000
5 closing entry
31/12 income summary 60,000
P – L change in exchange rate 60,000