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Journal Entry To Record The Purchase Of Goods Assignment Paper
Question
a) A UK company purchased Plant and Machinery for use in the UK from a Canadian company for
$267,000. The exchange rate at the date of purchase was $1.8 = ₤1 and the year-end was $1.5=₤1.
b) A UK company purchased goods from a French company in May 2016 for Fr 10,500, when the
exchange rate was Fr 11.6 = ₤1. The account was paid on 15th July 2016 when the exchange rate was
Fr 11.9 = ₤1
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c) A UK company purchased goods from a German supplier in November 2016 for DM 4,500 when the
exchange rate was DM 3.9 = ₤1. The account has not been settled by 31st December 2016, the
company’s year-end. At that date the exchange rate was DM 3.8 = ₤1
d) A UK company takes out a ten year loan from an American bank in August 2015 for US $800,000. The
proceeds of the loan were converted to sterling and remitted to the UK when the exchange rate was
$1.41 = ₤1 (so the proceeds amounted to ₤567,376). At the company’s year-end at 31st December 2015,
the exchange rate was $1.42 = ₤1 and at 31st December 2016 was $1.39 = ₤1.
Required:
Make the necessary journal entries to record the above transactions and give any other necessary
explanation. Journal Entry To Record The Purchase Of Goods Assignment Paper
Step-by-step

ANSWER:-

a) Journal Entry to record the purchase of Plant and Machinery in UK by UK company from Canadian company: Debit- Plant and Machinery 267,000 Credit- Bank 267,000 Exchange Gain/Loss Calculation: Purchase value in GBP = 267,000/ 1.8 = ₤148,333. Receipt of UK Payment Value in GBP = 267,000/ 1.5 = ₤178,000. Exchange Gain = 178,000 – 148,333 = ₤29,667. b) Journal Entry to record the purchase of Goods in UK by UK company from French Company: Debit- Purchase of Goods 10,500 Credit- Bank 10,500 Exchange Loss Calculation: Purchase value in GBP = 10,500/ 11.6 = ₤902. Receipt of UK Payment Value in GBP = 10,500/ 11.9 = ₤878. Exchange Loss = 902 – 878 = ₤24.

Explanation for step 1

A. Journal Entry to record the Exchange Gain : Debit- Exchange Gain A/c 29,667 Credit- Bank 29,667

B. Journal Entry to record the Exchange Loss : Debit- Bank 24 Credit- Exchange Loss A/c 24 Journal Entry To Record The Purchase Of Goods Assignment Paper

FINAL ANSWER:-

a) Journal Entry to record the purchase of Plant and Machinery in UK by UK company from Canadian company: Debit- Plant and Machinery 267,000 Credit- Bank 267,000 Exchange Gain/Loss Calculation: Purchase value in GBP = 267,000/ 1.8 = ₤148,333. Receipt of UK Payment Value in GBP = 267,000/ 1.5 = ₤178,000. Exchange Gain = 178,000 – 148,333 = ₤29,667. Journal Entry to record the Exchange Gain : Debit- Exchange Gain A/c 29,667 Credit- Bank 29,667 b) Journal Entry to record the purchase of Goods in UK by UK company from French Company: Debit- Purchase of Goods 10,500 Credit- Bank 10,500 Exchange Loss Calculation: Purchase value in GBP = 10,500/ 11.6 = ₤902. Receipt of UK Payment Value in GBP = 10,500/ 11.9 = ₤878. Exchange Loss = 902 – 878 = ₤24. Journal Entry to record the Exchange Loss : Debit- Bank 24 Credit- Exchange Loss A/c 24 c) Journal Entry to record the purchase of Goods in UK by UK company from German Company: Debit- Purchase of Goods 4,500 Credit- Bank 4,500 Exchange Loss Calculation: Purchase value in GBP = 4,500/ 3.9 = ₤1,154. Receipt of UK Payment Value in GBP = 4,500/ 3.8 = ₤1,184. Exchange Loss = 1,154 – 1,184 = ₤30. Journal Entry to record the Exchange Loss: Debit- Bank 30 Credit- Exchange Loss A/c 30 d) Journal Entry to record the Loan taken by UK company from American Bank: Debit- Bank 567,376 Credit- Loan 800,000 Exchange Gain Calculation: Loan value in GBP = 800,000/1.41 = ₤568,335. Receipt of UK Payment Value in GBP = 567,376. Exchange Gain = 568,335 – 567,376 = ₤959. Journal Entry to record the Year end Adjustment for Exchange Gain: Debit- Exchange Gain A/c 959 Credit- Loan 800,000

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Conclusion: From the above transactions, it is clear that UK company has made an exchange gain of 29,667 on the purchase of Plant and Machinery from Canadian company while an exchange loss of 24 has been made on the purchase of goods from French company. On the purchase of goods from German company, an exchange loss of 30 has been accounted for. In the last transaction, an exchange gain of 959 has been made on the loan taken by the UK company from American Bank.

NOTE:- I hope you got satisfaction from my answer, Hence this is a required answer.

Expert Answer

Journal Entry To Record The Purchase Of Goods Assignment Paper

Question

a) A UK company purchased Plant and Machinery for use in the UK from a Canadian company for $267,000. The exchange rate at the date of purchase was $1.8 = ₤1 and the year-end was $1.5=₤1. b) A UK company purchased goods from a French company in May 2016 for Fr 10,500, when the exchange rate was Fr 11.6 = ₤1. The account was paid on 15th July 2016 when the exchange rate was Fr 11.9 = ₤1

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c) A UK company purchased goods from a German supplier in November 2016 for DM 4,500 when the exchange rate was DM 3.9 = ₤1. The account has not been settled by 31st December 2016, the company’s year-end. At that date the exchange rate was DM 3.8 = ₤1 d) A UK company takes out a ten year loan from an American bank in August 2015 for US $800,000. The proceeds of the loan were converted to sterling and remitted to the UK when the exchange rate was $1.41 = ₤1 (so the proceeds amounted to ₤567,376). At the company’s year-end at 31st December 2015, the exchange rate was $1.42 = ₤1 and at 31st December 2016 was $1.39 = ₤1. Required: Make the necessary journal entries to record the above transactions and give any other necessary explanation. Journal Entry To Record The Purchase Of Goods Assignment Paper

Step-by-step

ANSWER:-

a) Journal Entry to record the purchase of Plant and Machinery in UK by UK company from Canadian company: Debit- Plant and Machinery 267,000 Credit- Bank 267,000 Exchange Gain/Loss Calculation: Purchase value in GBP = 267,000/ 1.8 = ₤148,333. Receipt of UK Payment Value in GBP = 267,000/ 1.5 = ₤178,000. Exchange Gain = 178,000 – 148,333 = ₤29,667. b) Journal Entry to record the purchase of Goods in UK by UK company from French Company: Debit- Purchase of Goods 10,500 Credit- Bank 10,500 Exchange Loss Calculation: Purchase value in GBP = 10,500/ 11.6 = ₤902. Receipt of UK Payment Value in GBP = 10,500/ 11.9 = ₤878. Exchange Loss = 902 – 878 = ₤24.

Explanation for step 1

A. Journal Entry to record the Exchange Gain : Debit- Exchange Gain A/c 29,667 Credit- Bank 29,667

B. Journal Entry to record the Exchange Loss : Debit- Bank 24 Credit- Exchange Loss A/c 24 Journal Entry To Record The Purchase Of Goods Assignment Paper

FINAL ANSWER:-

a) Journal Entry to record the purchase of Plant and Machinery in UK by UK company from Canadian company: Debit- Plant and Machinery 267,000 Credit- Bank 267,000 Exchange Gain/Loss Calculation: Purchase value in GBP = 267,000/ 1.8 = ₤148,333. Receipt of UK Payment Value in GBP = 267,000/ 1.5 = ₤178,000. Exchange Gain = 178,000 – 148,333 = ₤29,667. Journal Entry to record the Exchange Gain : Debit- Exchange Gain A/c 29,667 Credit- Bank 29,667 b) Journal Entry to record the purchase of Goods in UK by UK company from French Company: Debit- Purchase of Goods 10,500 Credit- Bank 10,500 Exchange Loss Calculation: Purchase value in GBP = 10,500/ 11.6 = ₤902. Receipt of UK Payment Value in GBP = 10,500/ 11.9 = ₤878. Exchange Loss = 902 – 878 = ₤24. Journal Entry to record the Exchange Loss : Debit- Bank 24 Credit- Exchange Loss A/c 24 c) Journal Entry to record the purchase of Goods in UK by UK company from German Company: Debit- Purchase of Goods 4,500 Credit- Bank 4,500 Exchange Loss Calculation: Purchase value in GBP = 4,500/ 3.9 = ₤1,154. Receipt of UK Payment Value in GBP = 4,500/ 3.8 = ₤1,184. Exchange Loss = 1,154 – 1,184 = ₤30. Journal Entry to record the Exchange Loss: Debit- Bank 30 Credit- Exchange Loss A/c 30 d) Journal Entry to record the Loan taken by UK company from American Bank: Debit- Bank 567,376 Credit- Loan 800,000 Exchange Gain Calculation: Loan value in GBP = 800,000/1.41 = ₤568,335. Receipt of UK Payment Value in GBP = 567,376. Exchange Gain = 568,335 – 567,376 = ₤959. Journal Entry to record the Year end Adjustment for Exchange Gain: Debit- Exchange Gain A/c 959 Credit- Loan 800,000

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Conclusion: From the above transactions, it is clear that UK company has made an exchange gain of 29,667 on the purchase of Plant and Machinery from Canadian company while an exchange loss of 24 has been made on the purchase of goods from French company. On the purchase of goods from German company, an exchange loss of 30 has been accounted for. In the last transaction, an exchange gain of 959 has been made on the loan taken by the UK company from American Bank.

NOTE:- I hope you got satisfaction from my answer, Hence this is a required answer.

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