A. On November 12, Kera, Inc., a U.S. Company, sold merchandise on credit to Kak
ID: 2566234 • Letter: A
Question
A. On November 12, Kera, Inc., a U.S. Company, sold merchandise on credit to Kakura Company of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 on the date of the sale.
B. On December 31, when Kera prepared its financial statements, the exchange rate was $0.00843. Complete the appropriate adjusting entry.
C. Kakura Company paid in full on January 12, when the exchange rate was $0.00861. On January 12, Kera should prepare the following journal entry:
Required: Complete the appropriate entries that would be made for each of the transactions listed in A, B, & C.
Explanation / Answer
Solution:
Journal Entries
Transaction
Date
Account Titles and Explanation
Debit
Credit
A)
Nov.12
Accounts Receivable (1,500,000*0.00837)
$12,555
Sales Revenue
$12,555
(Sales recorded)
B)
Dec.31
Accounts Receivable
$90
Exchange Gain (1,500,000*(0.00843 - 0.00837)
$90
(Exchange gain on Accounts Receivable recorded)
C)
Jan.12
Cash (1,500,000*0.00861)
$12,915
Accounts Receivable (12555 + 90)
$12,645
Exchange Gain (12915 - 12645)
$270
(Amount received from Kakura Company and Exchange gain recorded)
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Transaction
Date
Account Titles and Explanation
Debit
Credit
A)
Nov.12
Accounts Receivable (1,500,000*0.00837)
$12,555
Sales Revenue
$12,555
(Sales recorded)
B)
Dec.31
Accounts Receivable
$90
Exchange Gain (1,500,000*(0.00843 - 0.00837)
$90
(Exchange gain on Accounts Receivable recorded)
C)
Jan.12
Cash (1,500,000*0.00861)
$12,915
Accounts Receivable (12555 + 90)
$12,645
Exchange Gain (12915 - 12645)
$270
(Amount received from Kakura Company and Exchange gain recorded)