The Question below:
Miston Co buys goods priced at €50,000 from a Dutch company on 1 November 20X8. The invoice is duefor settlement in two equal instalments on 1 December 20X8 and 1 January 20X9.
The exchange rate moved as follows:
1 November 20X8 - 1.63 to $1
1 December 20X8 – 1.61 to $1
31 December 20X8 – 1.64 to $1
What will be the net exchange gain or loss to be reported in the financial statements of Miston Co at 31 December 20X8?
$ gain / (loss) (to nearest $)
Answer:
Date Rate $ € Gain/(loss)
1/11 1.63 30,675 50,000
1/12 1.61 (15,528) (25,000) (191)
31/12 1.64 15,244 25,000 93
98
Is the answer correct? For my calculation, there's 284 gain on the financial statement. Which is
1 Nov 50000/1.63 = 30675
DR PURCHASE
CR PAYABLE
1 DECEMBER 25000/1.61 = 15528
DECREASE IN PAYBLE
DR PAYABLE 15147
CR PURCHASE 15147
31 DECEMBER 25000/1.64 = 15244
DR PAYABLE 15528
CR BANK 15244
CR GAIN 284
Ask the Tutor ACCA FR
BPP P&R Kit Question 179
7y ago#1Hi,
No, the answer is correct.
When the first payment is made you get an exchange loss on the payment of €25,000. Do not then restate the remainder of the payable balance. So your first exchange difference comes from this cash payment, where is seems that you've just adjusted the payable balance and not made a cash payment.
Then at the reporting date the remainder of the €25,000 that is left is then remeasured at the 1.64, and exchange differences calculated. There is no cash payment and just a movement in the payable balance with an associated exchange rate movement.
Thanks
Hi, Can you please help me calculate the exchange difference in the above question ?
4y ago#3What is it exactly that you do not understand with regards to the calculation? Let me know and I can help.
Thanks
that how did they calculated the gain/loss in it ?
4y ago#5The gain is just the balancing figure.
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