New Colony Corporation (a U.S. company) made a sale to a foreign customer on September 15 2013 for

QUESTION

New Colony Corporation (a U.S. company) made a sale to a foreign customer on September 15, 2013, for 100,000 foreign currency units (FCU). It received payment on October 15, 2013. The following exchange rates for 1 FCU apply: September 15, 2013 $0.40 September 30, 2013 0.42 October 15, 2013 0.37 Prepare all journal entries for New Colony in connection with this sale, assuming that the company closes its books on September 30 to prepare interim financial statements.
Solution: Date particulars debit credit working notes 15-Sep Customer A/c Dr 40,000.00 100000 * 0.40 To, Sale A/c 40,000.00 ( being 100000 units @ $0.40 per unit recorded) 30-Sep Customer A/c Dr 2,000.00 100000 * 0.02 To, Foreign exchange fuctuation A/c 2,000.00 ( Assets recognised at closing rate 0.42 i.e 100000 * 0.02 ) 15-Oct Cash / Bank A/c Dr 37,000.00 100000

* 0.37 Foreign exchange fuctuation A/c Dr 2,000.00 100000 * 0.02 Foreign Exchange Loss A/c Dr 3,000.00 100000 *( 0.40 0.37 ) To ,Customer A/c 42,000.00 100000 * 0.42 ( Being Cash realised and loss recorded and temporary foreign gain reversed )

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