Question

On March 1, 20X8, Wilson Corporation sold goods for a U.S. dollar equivalent of $31,000 to a Thai company. The transaction is denominated in Thai baht. The payment is received on May 10. The exchange rates were: March 1: 1 baht = $0.031 May 10: 1 baht = 0.034 What entry is required to revalue foreign currency payable to U.S. dollar equivalent value on May 10?

Answer 1

Accounts Receivable (baht)

3,000

Foreign Currency Transaction Gain

3,000

Step-by-step explanation:

U.S. dollar equivalent value: = $31,000/.031 = 1,000,000

$31,000 = Baht 1,000,000 x $.031 March 1 spot rate

$34,000 = Baht 1,000,000 x $.034 May 10 spot rate

$3,000 = Baht 1,000,000 x (.031 - .034) Gain

1 dollar = 34.66 thai baht