Charin Corporation, a U.S. corporation, imports and exports small electronics. O
ID: 2477590 • Letter: C
Question
Charin Corporation, a U.S. corporation, imports and exports small electronics. On December 1, 2014, Charin purchased components from an Egyptian manufacturer amounting to 500,000 Egyptian pounds. The purchase is payable in Egyptian pounds. At December 30, Charin wanted to take advantage of favorable exchange rates but did not have the full amount required to pay off the entire amount. Charin wired the funds to pay off half of the balance owed and expected to pay the remaining balance on January 3, 2015. Charin paid the remaining balance on January 3, 2015. The respective exchange rates were as follows: December 1, 2014 1 pound = $.170 December 30, 2014 1 pound = $.165 December 31, 2014 1 pound = $.175 January 3, 2015 1 pound = $.180 Document the journal entries related to these transactions for the four dates shown. If no entry is required, record "no entry."
Explanation / Answer
The Egyptian pound & $ amts of Transactions are as follows: Date Egyptial pound $ Amt Gain loss/Egyptian pound Total Gain /Loss Dec 1. Transaction 500,000 85,000 Dec 30. half due paid 250,000 41,250.00 $ 0.0050 1,250 Dec 31 . Unrealised gain Loss 250,000 43,750 (0.0050) (1,250) Jan 3. balance paid 250,000 45,000 (0.0100) (2,500) Journal Entries In Egyptinal pund In USD Date Account Title Dr $ Cr $ Dr $ Cr $ Dec 1.2014. Merchandise Inventory 500,000 85,000 Accounts Payable 500,000 85,000 (recording purchase) Dec 30.2014. Accounts Payable 250,000 42,500 Cash/Bank 250,000 41,250 Realized Gain on Foreign Exchange 1,250 Dec 31.2014. Unrealized Loss On Foreign Vendors PAyable(Balance sheet) - 1,250 Unrealized Loss on Foreign Exchange (P/L) - 1,250 Jan 1.2014 Unrealized Loss On Foreign Vendors PAyable(Balance sheet) 1,250 Unrealized Loss on Foreign Exchange (P/L) 1,250 (reversal of unrealized loss entry on year end) Jan 3. Accounts Payable 250,000 42,500 Cash/Bank 250,000 45,000 Realized Loss on Foreign Exchange 2,500 (recording balance payment and the realized loss)