Question

On December 1 of 2017, APU, a U.S. company, makes a sale to a Spanish customer. Sales price is 1,600,000 euro, and the spot rate is $1.45 per euro. APU allows the customer 3 months to pay On March 1 of 2018, APU collects the sales amount with spot rate $1.49 per euro.

Prepare the journal entries.

Answer 1

APU

Journal Entries:

December 1, 2017:

Debit Accounts receivable $2,320,000

Credit Sales Revenue $2,320,000

To record the sale of goods on account.

March 1, 2018:

Debit Cash $2,384,000

Credit Accounts receivable $2,320,000

Credit Gain from Foreign Exchange $64,000

To record the receipt of cash, including the gain from forex.

Step-by-step explanation:

a) Data and Analysis:

December 1, 2017: Accounts receivable $2,320,000 Sales Revenue $2,320,000 (1,600,000 * $1.45)

March 1, 2018: Cash $2,384,000 (1,600,000 * $1.49) Accounts receivable $2,320,000 Gain from Foreign Exchange $64,000 (1,600,000 * ($1.49 - $1.45)