Question

Peerless Corporation (a U.S. company) made a sale to a foreign customer on September 15, for 119,000 crowns. It received payment on October 15. The following exchange rates for 1 crown apply: September 15$0.61 September 30 0.65 October 15 0.60 Prepare all journal entries for Peerless in connection with this sale, assuming that the company closes its books on September 30 to prepare interim financial statements.

Answer 1

Prepare journal entries for Peerless Corporation in connection with the sale, assuming a closing date of September 30.

Step-by-step explanation:

Journal Entries for Peerless Corporation:

1. On September 15:

• Debit Accounts Receivable for 119,000 crowns
• Credit Sales Revenue for 119,000 crowns

On September 30 (closing books):

• Debit Currency Exchange Loss for $3,900 ($119,000 x 0.65 - $119,000 x 0.61)
• Credit Accounts Receivable for $119,000

On October 15:

• Debit Cash for $119,000
• Debit Currency Exchange Loss for $3,500 ($119,000 x 0.60 - $119,000 x 0.65)
• Credit Accounts Receivable for 119,000 crowns
• Credit Currency Exchange Gain for $7,100 ($119,000 x 0.60 – $119,000 x 0.61)

Answer 2

Exchange rate on September 15: 1 Crown = $0.61; 119,000 Crown = (119,000*$0.61) = $72,590.

September 30 = (119,000*0.65) = $77,350.

October 15 = (119,000*$0.60) = $71,400.

JOURNAL ENTRY

Date Account Debit Credit

15-Sep Account receivable $72,590

Sales $72,590

(Sale to a foreign customer for 119,000 crown Exchange rate = $0.61)

30-Sep Account receivable $4,760

Foreign currency exchange gain $4,760

($77,350-$72,590)

15-Oct Foreign currency exchange loss $5,950

Account receivable $5,950

($71,400-$77,350)

Cash $77,350

Accounts Receivable $77,350