Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › foriegn exchange rate
- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
MikeLittle.
- AuthorPosts
- May 20, 2017 at 7:05 pm #387152
Hi Mr Mike, I have a question
inventory purchased 286000
exchange rates:25 october 11.16$,16 November 10.8$ and 31 December 11.02$Workings
25 october286000/11.16=25627
Debit inventory 25627
credit trade payable -2562716 november
286000/10.87=26311
26311-25627=684
debit expense-684
credit trade payable-684debit expense-684
debit trade payable -25627
credit cash-2631131 december
286000/11.02=2595325627-25953=326
debit expense-326
debit trade payable-326debit expense-326
debit trade payable-25627
credit cash-25953let us assume another example which also has been taken from Bpp test bank page number 69
MIston buys priced at 50000euro from a Dutch company on 1 november 20×8.The invoice is due for settlement in two equal installments on 1 december 20×8 and 1 january 20×9
Exchange rate
1november 20×8-1.63 to 1 $
1 december 20×8-1.61 to 1$
31 december 20×8-1.64 to 1 $what will be the net exchange gain or loss to be reported in the financial statements of Miston at 31 december 20×8
Solution
1 November 20×850000/1.65=30675-understood this part
debit purchase-30675
credit trade payable-306751 december
25000/1.61=15528we got 25000 due to two equal installments 50000/2=25000?
loss 191 recognised why 191?
31 december
25000/1.64=15244
gain 93 why?
overall 98 loss
could u explain it to me please?
May 20, 2017 at 7:58 pm #387165“50000/1.65=30675-understood this part”
I don’t see how you could have understood this part because 50,000 euros at 1.65 = $1 does NOT equal $30,675! It equals $30,303
However, the exchange rate that you should have used is 1.63 to $1 and that does equal $30,675
The 50,000 euros at 1.63 to $1 = $30,675
Now view this figure as two equal halves of $15,337.50 each
Half that debt is paid off on 1 December when the exchange rate was 1.61 = $1 so 25,000 euros at 1.61 = $15,527.95 so that’s a loss of $190.45 when compared with the $15,337.50 from above
the second half is ready for payment ‘tomorrow’ – 1 January
At 31 December the exchange rate was 1.64 so 25,000 euros at 1.64 = $15,243.90 and that represents a gain of $93.60 when compared with the $15,337.50 from above
OK now?
- AuthorPosts
- The topic ‘foriegn exchange rate’ is closed to new replies.