7-17. A U.S. entrepreneur seeking to sell souvenirs at the 2012 summer Olympics in London pays British Airways, a UK carrier, $1,500 for a Los Angeles–

London round-

trip ticket.

This exercise explains how U.S. governmental statisticians account for international transactions. You may want to refer to Tables 7.3 and 7.5 and to the definitions of capital inflows and capital outflows on page 226.
Example 1 Suppose Walmart imports $1 million worth of Blu-ray players from the Sony Corporation of Japan. The debit entry is a merchandise import of $1 million.
Here is the tough part. What is the offsetting credit entry?
The answer is a capital inflow affecting the short-term portfolio account.

Example 2 A North Korean restaurant owner in Los Angeles who escaped her homeland smuggles $1,000 in cash back to her relatives in Pyongyang. The U.S. BOP accounts should record this transaction as follows

Example 3 Mitsubishi buys 51 percent of Rockefeller Center for $846 million from a Rockefeller family trust. This transaction will be recorded in the U.S. BOP accounts as follows:

Transcribed Image Text:

Debit Credit Unilateral transfer account $1,000 Short-term portfolio account $1,000