Bev Company sells heavy machinery. On October 1, Year 10, Bev sold goods in the amount of
Question:
Bev Company sells heavy machinery. On October 1, Year 10, Bev sold goods in the amount of £850,000 (£ is Pounds Sterling) to Basketsprint in the UK. Bev accepted a note receivable and payment is due from Basketsprint on December 31 Year 14. Basketsprint has been in business for 3 decades and Bev has conducted business with them for the last 10 years; there is no risk of default. The note receivable has a 12% interest rate per year and is payable on December 31, each year. Both the interest and the note will be paid in Pounds Sterling. Also on October 1, Year 10, Bev purchased E1,500,000 (E is Euro) of inventory from a European company. This amount is payable on December 1, Year 11. There is no interest on the liability. Hedge accounting was not applied to either transaction. Bev has a December 31st year-end.
Exchange Rates
October 1, Y10 Spot Rate 1E = CDN 2.4 ; $1 = £0.58
December 31, Y10 Spot Rate 1E = CDN 2.9 ; $1 = £0.56
Y10 Average Rate 1E = CDN 2.3 ; $1 = £0.57
Oct – Dec Y11 Average Rate 1E = CDN 2.6 ; $1 = £0.61
Dec 1, Y11 Spot Rate 1E = CDN 2.7 ; $1 = £0.62
Dec 31, Y11 Spot Rate 1E = CDN 3.1 ; 1$ = £0.60 Y11
Average Rate 1E – CDN 3.0 1$ = £0.63
Required:
Prepare all the journal entries for Years 10 and 11 for the two transactions.
Financial Accounting A User Perspective
ISBN: 978-0470676608
6th Canadian Edition
Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry