ASISTENSI 11 – CHAPTER 11

AKUNTANSI KEUANGAN LANJUTAN

TIM ASISTEN DOSEN

PROBLEM 1: FOREIGN CURRENCY TRANSACTIONS

Venus Shipping, a U.S company, is an importer and exporter. The following are some
transactions with foreign companies.
1. Venus sold blue jeans to a South Korean importer on January 15 for $7,400,
when the exchange rate was South Korean won (KRW) 1 = $0.185. Collection, in
dollars, was made on March 15, when the exchange rate was 0.180.
2. On March 8, Venus purchased woollen goods from Ireland for €7,000. The
exchange rate was €1 = $0.622 on March 8, but the rate was $0.610 when
payment was made on May 1.
3. Venus sold microcomputers to a German enterprise on June 6 for €150,000.
Payment was due in 90 days on September 4. On July 6, Venus entered into a
60-day undesignated forward contract to sell €150,000 at a forward rate of €1 =
$0.580. The spot rates follow:

June 6 $0.600

July 6 $0.590

September 4 $0.585

Required:
Prepare all necessary journal entries for Venus to account for the foreign transactions,
including the sales and purchases of inventory, forward contracts, and settlements.

PROBLEM 2: FOREIGN PURCHASES AND SALES TRANSACTIONS AND HEDGING

Part I
Sorgum Company had the following export and import transactions during 20X5:
1. On March 1, Sorgum sold goods to a Canadian company for C$30,000, receivable
on May 30. The spot rates for Canadian dollars were C$1 = $0.65 on March 1 and
C$1 = $0.68 on May 30.
2. On November 16, Sorgum purchased inventory from a London company for
£10,000, payable on January 15, 20X6. The spot rates for pounds were £1 =
$1.65 on November 16, £1 = $1.63 on December 31, and £1 = $1.64 on January
15, 20X6. The forward rate on December 31, 20X5, for a January 15, 20X6,
exchange was £1 = $1.645.
Required:
a. Prepare journal entries to record Sorgum’s import and export transactions during
20X5 and 20X6.
b. What amount of foreign currency transaction gain or loss would Sorgum report on its
income statement for 20X5?

Part II (refers to part 1)

Assume that Sorgum used forward contracts to manage the foreign currency risks of all
of its export and import transactions during 20X5.
1. On March 1, 20X5, Sorgum anticipating a weaker Canadian dollar on the May 30,
20X5, settlement date, entered into a 90-day forward contract to sell C$30,000 at
a forward exchange rate of C$1 = $0.64. The forward contract was not
designated as a hedge.
2. On November 16, 20X5, Sorgum anticipating a strengthening of the pound on the
January 15, 20X6, settlement date, entered into a 60-day forward contract to
purchase £10,000 at a forward exchange rate of £1 = $1.67.
Required:
a. Prepare journal entries to record Sorgum’s foreign currency activities during 20X5 and
20X6.
b. What amount of foreign currency transaction gain or loss would Sorgum report on its
income statement for 20X5 if Part I and II of this problem were combined?
c. What amount of foreign currency transaction gain or loss would Sorgum report on its
income statement for 20X6 if Part I and II of this problem were combined?

PROBLEM 3: USES OF FORWARD EXCHANGE CONTRACTS WITHOUT TIME VALUE

OF MONEY CONSIDERATIONS
On December 1, 20X1, Blackbird Inc. entered into a 120-day forward contract to sell
100,000 Australian dollars (A$). Blackbird’s fiscal year ends on December 31. The direct
exchange rates follow:
Forward Rate for March
Date Spot Rate
31, 20X2
December 1, 20X1 $0.600 $0.609
December 31, 20X1 0.610 0.612
January 30, 20X2 0.608 0.605
March 31, 20X2 0.602

Required:
Prepare all journal entries for Blackbird Inc. if the forward contract was to manage the
foreign currency risks from the purchase of furniture for A$100,000 on December 1,
20X1, with payment due on March 31, 20X2. The forward contract is not designated as a
hedge.