Use the following information for questions 13 and 14 On October 1, 2014, Patton

Question

Use the following information for questions 13 and 14 On October 1, 2014, Patton Corporation purchased Merchandise from a German supplier at a price of Euro 240,000 and issued a 7-month, 8% note denominated in Euro to the supplier. The note was payable on April 30, 2015. The bank exchange rates: 10-1-2014 Euro 1-US$1.45 Euro-US$1.39 Euro 1-USS1.43 12-31-2014 4-30-2015 Spot Rate 13. How much total foreign currency transaction gain or loss should Patton report on its 2015 income statement? A. Loss of $14,400 B. Loss of $9,792 C. Loss of $9,856 D. Gain of S14,688 14. The journal entries for Patton on April 30, 2015 A. credit of $359,216 to Cash B. credit of $350,064 to Cash C. debit of S8,896 to Interest Expense D. debit of $16,016 to Interest Expense

Explanation / Answer

13)

Exchange loss in cost of merchandise as on 4-30-2015 = 240000*(1.43 - 1.39)

= 240000*0.04 = $9600

Interest payable as on 12-31-2014 = 240000*8%*3/12 *1.39 = 4800*1.39 = $6672

Exchange loss in interest payable account recorded as on year end = (4800*1.43) - 6672 = $192

Total foreign currency transaction loss to be reported in 2015 = $9600 +$192 = $9792

So, answer is B. Loss of $9,792

14)

Cash payment for supply of Merchandise = 240000*1.43 = $343200

Cash payment for interest = 240000*8%*7/12 *1.43 = 11200*1.43 = $16016

Total payment of cash =  $343200 + $16016 = $359216

So, answer is A. credit of $359,216 to Cash

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