Bob Company (located in the U.S.) sells inventory to Grant Company (located in G

Question

Bob Company (located in the U.S.) sells inventory to Grant Company (located in Great Britain). Grant Company requires that the sales be billed in British pounds. This creates foreign currency sales for Bob Company. The sale is invoiced at £16,000 with credit terms of 2/10, net 30. £1 = $1.40. What is the journal entry Bob Company makes to record this sale?

Refer to Question #4. Grant pays for the inventory in twenty days. At the time of the payment £1 = $1.30. What is the journal entry Bob Company makes to record the receipt of the payment?

Explanation / Answer

Journal entries: Date Accounts title and explanations Debit $ Credit $ a. Accounts receivable Dr. (16000*1.40) 22400    Sales revenue Account 22400 b. Cash account Dr. (16000*1.30) 20800 Foreign exchange loss Dr. 1600     Accounts receivable 22400

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