PROBLEM

1. On September 1, 2020, Creed Co. sold merchandise to a foreign entity for 250,000 francs. Terms
of the sale require payment in francs on February 1, 2021. On September 1, 2020, the spot
exchange rate was P1.2 per franc. At December 31, 2020 the spot rate was P1.19, but the rate
increased to P1.22 by February 1, 2021 when payment was received.

Required: Provide journal entries in 2020 and 2021.

9/1/2020 Accounts receivable 300,000

Sales 300,000

12/31/2020 Foreign exchange loss 2,500

Accounts receivable 2,500

02/01/2021 Cash(250,000 xP1.22) 305,000

Accounts receivable 297,500
Foreign exchange gain 7,500

2. On November 15, 2020 Lemon Co. ordered merchandise on an FOB shipping point term, from a
foreign entity for 200,000 marks. The merchandise was shipped and invoiced to Lemon on
December 10, 2020. Lemon paid the invoice on January 10, 2021. The spot rates are as follows:

Nov. 15, 2020 P22.4955

December 10, 2020 P22.4875
December 31, 2020 P22.4675
January 10, 2021 P22.4475

Required: Provide journal entries in 2020 and 2021.

12/10/2020 Purchases 4,497,500

Accounts payable 4,497,500

12/31/2020 Accounts payable 4,000

Foreign exchange gain 4,000

01/10/2021 Accounts payable 4,493,500

Cash(200,000xP22.4475) 4,489,500
Foreign exchange gain 4,000
SAMPLE PROBLEM
1. On November 29, 2022, ABC Co. placed a non-cancellable purchase order with a company
based in the US to import a machine for $10,000. The contract term is FOB shipping point. The
machine was shipped on December 1, 2022 and was received by ABC on December 15, 2022.
The purchase price was settled on January 3, 2023.

The following are the exchange rates per $1.

November 29, 2022 P55

December 1, 2022 58
December 15, 2022 57
December 31, 2022 60
January 3, 2023 61

Required: Provide the journal entries.

12/1/2022 Purchases 580,000

Accounts Payable 580,000

12/31/2022 Forex loss 20,000

Accounts Payable 20,000

1/3/2023 Accounts Payable 600,000

Forex loss 10,000
Cash 610,000

2. On September 1, 2022, Creed Co. sold merchandise to a foreign entity for 250,000 francs.
Terms of the sale require payment in francs on February 1, 2023. On September 1, 2022, the
spot exchange rate was P1.2 per franc. At December 31, 2022 the spot rate was P1.19, but the
rate increased to P1.22 by February 1, 2023 when payment was received.

Required: Provide journal entries in 2022 and 2023.

8/1/2022 Accounts Receivable 300,000

Sales 300,000

12/31/2022 Forex loss 2,500

Accounts Receivable 2,500

2/1/2023 Cash 305,000

Accounts Receivable 297,500
Forex gain 7,500