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Chapter 11 - Multinational Accounting: Foreign Currency Transactions And Financial Instruments
P11-28B (continued)
d.
June 1, 20X2, entries to record the sale of the oil and other entries:
June 1, 20X2
Cash
340,000
Sales
340,000
Record the sale of 10,000 barrels of oil at $34 per barrel.
Cost of Goods Sold
330,000
Oil Inventory
330,000
Recognize the cost of the oil sold.
Other Comprehensive Income – Reclassification
30,000
Cost of Goods Sold
30,000
Reclassify into earnings the other comprehensive income from the cash flow
hedge.
Chapter 11 - Multinational Accounting: Foreign Currency Transactions And Financial Instruments
P11-31 Determining Financial Statement Amounts
Transaction
1
2
3
4
Forward Contract Receivable
$20,200
$20,200
$20,200
$20,200
Inventory
19,800
21,000
21,000
NA
Accounts Payable
19,600
19,600
19,600
NA
Foreign Currency Exchange
1,000
G
NA
1,000
G
800
G
Gain (Loss), net
Other Comprehensive Income
NA
2,200
G
NA
NA
Gain (Loss), net
Computational support:
Forward Contract Receivable: $20,200 = €20,000 x $1.01 12/31 forward rate
Inventory: $19,800 =
$21,000 accounts payable less $1,200 firm commitment
$21,000 =
€20,000 x $1.05 11/30 spot rate
Accounts Payable: $19,600 = €20,000 x $0.98 12/31 spot rate
Foreign Currency Exchange Gain or (Loss), net:
Transaction 1: $1,000 =
$ 1,200 exchange gain on forward contract from
change in forward rate from 9/1 to
11/30: (€20,000 x ($1.03 -$0.97))
- 1,200 exchange loss on firm commitment for
change in forward rate from 9/1 to
11/30: (€20,000 x ($1.03 -$0.97))
- 400 exchange loss on forward contract from
change in forward rate from 11/30 to
12/31: (€20,000 x ($1.01 -$1.03))
+ 1,400 exchange gain on account payable for
change in spot rate from 11/30 to
12/31: (€20,000 x ($0.98 -$1.05))
Transaction 2:
No net foreign currency exchange gain because ASC 815 specifies
an offset of the gain from the revaluation of the account payable by
an equal amount from other comprehensive income.
