Monroe College Advanced Accounting Test #2 November 27,2017 Problem: 3-20 Points
ID: 2582570 • Letter: M
Question
Monroe College Advanced Accounting Test #2 November 27,2017 Problem: 3-20 Points Monroe, Inc.. a U.S. Company, imports machines. During April the company entered into the following transaction with a Japanese Company. All rate quotations are direct exchange rates. The company has an April 30 fiscal year-end. Purchased machines from Japan, on account, at an invoice cost of 1,000,000 yen. On this date the exchange rate for the yen was $.009 The account is to be settled on May 15 April 3 Entered into a forward contract to buy 1,000,000 Yen on May 15 for $.0092 per Yen. April 3 The direct exchange quotations for specific dates are: April 30 May 15 Spot Rate 0093 0098 Contract Rate 0095 Required: Prepare journal entries on the books of Monroe, Inc. to record the transactions listed above for the transaction date, balance sheet date and settlement date.Explanation / Answer
JOURNALS IN THE BOOKS OF BUYER (MONROE)
DATE
DETAILS
AMOUNT
$
DEBIT A/C
CREDIT A/C
APR
3
PURCHASE OF 1000 MACHINES YEN 1,000,000
PAYABLE ON MAY15
9000
MACHINES(TEMP) A/C
800
PREMIUM
ON FWD CONTRACT
9800
CREDITOR:
JAP CO
APR
3
PURCHASE OF
YEN 1,000,000
PAYABLE ON MAY15
9200
CASH (TEMP)
600
PREMIUM
ON FWD CONTRACT
9800
CREDITOR:
BANK
APR
30
GAIN ON FUTURE CONTRACT
500
GAIN ON FUTURE CONTRACT
DIFFERENCE ON EXCHANGE
300
MACHINES
APR
30
PAYMENT TO CREDITOR FOR MACHINES
9800
CREDITOR:
JAP CO
9800
CASH
APR
30
GAIN ON FUTURE CONTRACT
500
GAIN ON FUTURE CONTRACT
GAIN ON FUTURE CONTRACT
DIFFERENCE ON EXCHANGE
300
CASH
DIFFERENCE ON EXCHANGE
APR
30
PURCHASE OF
YEN 1,000,000
9800
CREDITOR:
BANK
9800
CASH
JOURNALS IN THE BOOKS OF BUYER (MONROE)
DATE
DETAILS
AMOUNT
$
DEBIT A/C
CREDIT A/C
APR
3
PURCHASE OF 1000 MACHINES YEN 1,000,000
PAYABLE ON MAY15
9000
MACHINES(TEMP) A/C
800
PREMIUM
ON FWD CONTRACT
9800
CREDITOR:
JAP CO
APR
3
PURCHASE OF
YEN 1,000,000
PAYABLE ON MAY15
9200
CASH (TEMP)
600
PREMIUM
ON FWD CONTRACT
9800
CREDITOR:
BANK
APR
30
GAIN ON FUTURE CONTRACT
500
GAIN ON FUTURE CONTRACT
DIFFERENCE ON EXCHANGE
300
MACHINES
APR
30
PAYMENT TO CREDITOR FOR MACHINES
9800
CREDITOR:
JAP CO
9800
CASH
APR
30
GAIN ON FUTURE CONTRACT
500
GAIN ON FUTURE CONTRACT
GAIN ON FUTURE CONTRACT
DIFFERENCE ON EXCHANGE
300
CASH
DIFFERENCE ON EXCHANGE
APR
30
PURCHASE OF
YEN 1,000,000
9800
CREDITOR:
BANK
9800
CASH