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Foreign Currency Transactions Analysis

ATC corp purchased raw materials from a foreign supplier on May 8. Payment of 2 million foreign currency units was due on May 31. The exchange rates on relevant dates were provided. To calculate the amount in ATC's functional currency to pay on June 7, the payment amount is adjusted using the exchange rates, resulting in a cost of 2.4 million functional currency units. Brisco Bricks also purchased raw materials on May 8 from a foreign supplier, with payment due on May 31. The exchange rates on relevant dates were provided. Brisco would record a foreign exchange loss of 20,000 on May 31.

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607 views1 page

Foreign Currency Transactions Analysis

ATC corp purchased raw materials from a foreign supplier on May 8. Payment of 2 million foreign currency units was due on May 31. The exchange rates on relevant dates were provided. To calculate the amount in ATC's functional currency to pay on June 7, the payment amount is adjusted using the exchange rates, resulting in a cost of 2.4 million functional currency units. Brisco Bricks also purchased raw materials on May 8 from a foreign supplier, with payment due on May 31. The exchange rates on relevant dates were provided. Brisco would record a foreign exchange loss of 20,000 on May 31.

Uploaded by

John Philip L Concepcion
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© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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  • Foreign Exchange Calculations

ATC corp purchases raw material from its foreign supplier, JLB, on May 8.

  Payment
of 2,000,000 foreign currency units (FC) is due in 30 days.  May 31 is ATC's fiscal
year-end.  The pertinent exchange rates were as follows:
  Indirect Exchange
rates
May 8 0.8000
May 31 0.7937
June 7 0.8333
 
How much will it cost, in terms of the Functional Currency, ATC to finally pay the
payable on June 7? 

2,400,000.

Brisco Bricks purchases raw material from its foreign supplier, Bolivian Clay, on May
8.  Payment of 2,000,000 foreign currency units (FC) is due in 30 days.  May 31 is
Brisco's fiscal year-end.  The pertinent exchange rates were as follows:
  Selling Spot Buying Spot
Rate Rate
May 8 P 1.25 P 1.23
May 31 P 1.26 P 1.25
June 7 P 1.20 P 1.21
 
How much Foreign Exchange Gain or Loss should Brisco record on May 31? 

20,000 loss.

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