Chapter 11 – Multinational Accounting: Foreign Currency Transactions And Financial Instruments
E11-10 (continued)
February 14, 20X8
Foreign Currency Transaction Loss
700
Foreign Currency Receivable from Exchange Broker (SFr)
700
Revalue foreign currency receivable to current equivalent U.S. dollar value:
$96,600 = SFr 140,000 x $0.69 Feb. 14, 20X8, spot rate
– 97,300 = SFr 140,000 x $0.695 Dec. 31, 20X7, forward rate
$ 700 = SFr 140,000 x ($0.69 – $0.695)
Accounts Payable (SFr)
1,400
Foreign Currency Transaction Gain
1,400
Revalue foreign currency accounts payable to current U.S. dollar value:
$96,600 = SFr 140,000 x $0.69 Feb. 14, 20X8, spot rate
– 98,000 = SFr 140,000 x $0.70 Dec. 31, 20X7, spot rate
$ 1,400 = SFr 140,000 x ($0.69 – $0.70)
Dollars Payable to Exchange Broker ($)
93,800
Cash
93,800
Pay U.S. dollars to exchange broker for forward contract.
Foreign Currency Units (SFr)
96,600
Foreign Currency Receivable from Exchange Broker (SFr)
96,600
Receive francs from exchange broker:
$96,600 = SFr 140,000 x $0.69 spot rate
Accounts Payable (SFr)
96,600
Foreign Currency Units (SFr)
96,600
Settle foreign currency payable.
Foreign Currency Exchange Loss (with Swiss Co.)
Foreign Currency Exchange Gain (with Broker)
Net effect on income
c.
Overall effect of transactions:
20X7 Net Foreign Currency Gain
20X8 Foreign Currency Loss on receivable
20X8 Foreign Currency Transaction Gain on payable
Overall effect
