Answer :

1. to record the exchange contract with broker

Dates Description Debit Credit
Contract Receivable $ 8,000
2-Nov-21
Contract Payable $ 8,000

Value of contract = order value x exchange rate

= 1.000.000 yen x $008
= $8000

2. to record the exchange loss of the company

Dates Description Debit Credit
Exchange Loss $ 200
31-Dec-21
Contract receivables $ 200

Exchange loss = value pf contract - (order value x forward rate on 31 dec 2011)
= $8000 - (1.000.000 yen x $0078)
= $8000 - $7800
= $200
ward rate on 31 dec 2011)
Answer :

1. Date Accounts, Titles & Explanantions Debit Credit

Contract Receivable (euros) $31,750
2-Oct-16 Contract Payable $31,750
(To record forward contract to purchase 50.000 euros)

Note :
Forward contract price Number of euros x forward rate
50.000 x $0.6350
$31.750

2. Date Accounts, Titles & Explanantions Debit Credit

Contract Receivable (euros) $350
31-Dec-16 Exchange gain $350
(To adjust the contract receivable for 50.000 euros)

Note : Contract receivable Number of Euros x change in value

50.000 x ($0.6420 - $0.6350)
50.000 x $0.0070
$350

3. Date Accounts, Titles & Explanantions Debit Credit

Contract payable $31,750
Cash $31,750
31-Mar-17
(To pay exchange broker for 50.000 euros at the forward rate of $.6350
established on October 2, 2016)

Note : Forward contract price Number of euros x Forward rate

50.000 x $0.6350
$31.750
Provide journal entry to record the change in the value of firm commitment on March 31, 2017, is as follows :

Date Accounts, Titles & Explanantions Debit Credit

Cash $32,800
Contract receivable $32,100
3/31/2017
Exchage gain $32,800
(To record receipt of 50.000 euros from exchange broker)

Provide journal entry to record the change in the value of firm commitment on March 31, 2017, is as follows :

Date Accounts, Titles & Explanantions Debit Credit

Cash $32,800
Contract receivable $32,100
31-Mar-17
Exchage gain $32,800
(To record receipt of 50.000 euros from exchange broker)
Amount received
Note : = Number of Eorus x Spot rate
50.000 x $0.6560
$32.800

Date Accounts, Titles & Explanantions Debit Credit

Exchange loss $700
31-Mar-17 Change in value of firm commitment $700
(To record the change in the value of the underlying firm commitment hedged)

Provide journal entry to record purchase and payment in Eorus at $0.6560 spot rate on March 31, 2017, is as fo

Date Accounts, Titles & Explanantions Debit Credit

Inventory $32,800 $32,800
31-Mar-17 Cash (euros) $32,800
(To record purchase and payment in euros at $.6560 spot rate)

Payment in Euros at $0.6560 spot rate on March 31,2017 is as follows :

Date Accounts, Titles & Explanantions Debit Credit

Inventory $32,800
31-Mar-17 Cash (euros) $32,800
(To record purchase and payment in euros at $.6560 spot rate)

Provide journal entry to record adjusment of inventory for change in the value of firm commitment on March

Date Accounts, Titles & Explanantions Debit Credit

Change in value of firm commitment $1,050
Inventory $1,050
31-Mar-17
(To record adjustment of inventory for the change in the value of the firm
commitment)
arch 31, 2017, is as follows :

arch 31, 2017, is as follows :

te on March 31, 2017, is as follows :

irm commitment on March 31,2017 is as follow :

Answer :
preliminary computation cost of investment in Sta $ 163,800
book value acquired (90.000£ * $1.66) $ 149,400
excess in dollars $ 14,400

excess allocated to equipment (6000£ * $1.66) $ 9,960

patent $ 4,440
$ 14,400

a. equity adjustment from axcess allocated to aquipment on December 31, 2011

Depreciation of excess based on £ (6000/3 year) £ 2,000
Underpreciated excess balance at year-end based on £
(4000 £ * $1.64 current rate) $ 6,560
Add: Depreciation on excess based on £ - 2011
2000 £ * $ 1.65 average rate $ 3,300
$ 9,860
Less: Beginning excess based on U.S. dollars $ 9,960
Equity adjustment from translation of excess allocated
to equipment (loss) $ -100

b. equity adjustment from excess allocated to patent on dec 31, 2011

Patent (must be carried in £) $4440/$1.66 = 2675 £ patent
Patent amortization is 2675 £ / 10 years = £267

Unamortized excess balance at year-end based on £ $ 3,949

(2408 £ * $1.64 current rate)
Add: Amortization of patent based on £ $ 441
(267 £ * $1.65 average rate)
$ 4,390
 Less : Beginning patent based on U.S. dollars $ 4,440
Equity adjustment from translation of patent (loss) $ -50

The entry to record the decrease in the equity adjustment related

to equipment and patent would be as follows:
Income from Sta $ 3,741
Equity adjustment from translation (equipment) $ 100
Equity adjustment from translation of patent $ 50
Invenstment In Sta $ 3,891
Answer:
1. Pak's Income from Sco =((net income of Sco * share of Pak's corporation) - amortization cost
= ($310.000 * 40%) - $12.210
= $124.000 - $12.210
= $111.790

notes:
value of patent = consideration paid - (opening net assts * share acquired)
= $1.080.000 - ($2.400.000 * 40%)
= $1.080.000 - $960.000
= $120.000
Amotization cost = value of patent * Average exchange rate
Useful life of patent * opening exchange rate
= $120.000*$1.16
10 years * $1.14
= $12.210

2. Investment cost =(Pak's consideration + Income from Sco - equity adjustment + (transl
= $1.080.000+$111.790-($4000)+(($212.000-$192.000)*40%)
= $1.080.000+$111.790-($4000)+(($20.000*40%)
= $1.080.000+$111.790-($4000)+$8000
= $1.203.790

notes:
value of patent = value of patent (in dollars)
Opening exchange rate
= $120.000
$1.14
 = € 105,263

Amotization cost = value of patent

(( * remaining life of patent) * closing exchange rate)
useful life of patent
= € 105,263
* 9 years) * $1.18
10 years
= € 94,737 * $1.18
= $ 111,790
Equity adjustment = (Patent on 1st january - amortization cost of patents - unamortised
value of patent)
= $120.000-$12.210-$111.790
= ($4000)

3. Investment cost =(Closing net assets * Pak's share) + Unamortized value of patent
= ($2.730.000*40%)+$111.790
= $1.092.000+$111.790
= $1.203.790
oration) - amortization cost of patents)

- equity adjustment + (translation adjustment - dividends) * Pak's share)

0-$192.000)*40%)
 osing exchange rate)

mortized value of patent