Question
Gemella Ltd. manufactures construction equipment for sale throughout Eastern Canada and the Northeastern United States. Its year-end is June 30. The following foreign currency transactions
Gemella Ltd. manufactures construction equipment for sale throughout Eastern Canada and the Northeastern United States. Its year-end is June 30. The following foreign currency transactions occurred during the Year 1 calendar year: On January 10, Gemella agreed to sell equipment to an American customer for US$200,000 for delivery on or before March 31 and received a deposit of US$20,000. The balance is payable on July 31. On March 17, the equipment was delivered to the American customer. On May 1, Gemella purchased 100 acres of land in Syracuse, New York, for US$300,000 as a long-term investment. Fifty percent of the purchase price was paid on May 1. The balance is due on May 1, Year 2, along with interest at the rate of 6%. On June 30, the 100 acres of land had a market value of US$310,000. Gemella reports its long-term investments in land at historical cost and discloses the market value of the land in the notes to its financial statements. On July 31, the balance owing was received from the American customer. The following spot rates exist during the period January to July, Year 1:
Spot Rates | |
January 10, Year 1 | US$1 = C$1.63 |
March 17, Year 1 | US$1 = C$1.64 |
May 1, Year 1 | US$1 = C$1.66 |
June 30, Year 1 | US$1 = C$1.70 |
July 31, Year 1 | US$1 = C$1.72 |
Exchange rates changed evenly between the dates indicated above.
Required:
(a) Prepare the journal entries for the transactions stated above including year-end adjusting entries. (Round your answers to 2 decimal places.)
Date | General Journal | Debit | Credit |
January 10, Year 1 | (Click to select) Equipment Cash Purchase Inventory Accounts receivable Notes receivable Exchange gains and losses Land Receivable from bank | ||
(Click to select) Notes payable Interest receivable Accounts payable Payable to bank Deferred revenue Loan payable Bills payable Exchange gain Sales | |||
Record receipt of deposit. | |||
March 17, Year 1 | (Click to select) Receivable from bank Accounts receivable Cash Equipment Notes receivable Inventory Land Purchase | ||
(Click to select) Sales Notes payable Accounts payable Payable to bank Interest receivable Bills payable Deferred revenue Loan payable Exchange gain | |||
(Click to select) Payable to bank Interest receivable Loan payable Exchange gain Sales Notes payable Deferred revenue Bills payable Accounts payable | |||
Record the sales. | |||
May 1, Year 1 | (Click to select) Accounts receivable Land Notes receivable Purchase Receivable from bank Equipment Exchange loss Inventory | ||
(Click to select) Exchange gain Cash Sales Interest receivable Bills payable Bonds Loan payable | |||
(Click to select) Interest receivable Bills payable Deferred revenue Payable to bank Loan payable Exchange gain Accounts payable Sales | |||
Record the purchase of land. | |||
June 30, Year 1 | (Click to select) Exchange loss Inventory Land Notes receivable Purchase Receivable from bank Equipment Accounts receivable | ||
(Click to select) Sales Interest receivable Accounts payable Exchange gain Payable to bank Notes payable Loan payable Bills payable | |||
Record the exchange gain or loss on Accounts receivable. | |||
(Click to select) Receivable from bank Equipment Accounts receivable Exchange loss Purchase Notes receivable Accounts payable Inventory Land | |||
(Click to select) Payable to bank Bills payable Exchange gain Accounts payable Interest receivable Sales Loan payable | |||
Record the exchange gain or loss on purchase of land. | |||
(Click to select) Purchase Equipment Accounts receivable Receivable from bank Interest expense Notes receivable Inventory Land | |||
(Click to select) Cash Notes receivable Accounts receivable Exchange loss Inventory Purchase Land Receivable from bank Equipment | |||
(Click to select) Exchange gain Accounts payable Loan payable Interest receivable Notes payable Sales Interest payable Bills payable Forward contract | |||
Record the interest expense. | |||
July 31, Year 1 | (Click to select) Equipment Accounts receivable Receivable from bank Land Exchange loss Purchase Notes receivable Inventory | ||
(Click to select) Notes payable Interest receivable Accounts receivable Exchange gain Loan payable Accounts payable Notes receivable Bills payable | |||
Record the exchange gain or loss on Accounts receivable. | |||
(Click to select) Notes receivable Receivable from bank Accounts receivable Inventory Accounts payable Equipment Purchase Land Cash | |||
(Click to select) Interest receivable Sales Cash Exchange gain Accounts payable Notes payable Bills payable Accounts receivable Loan payable | |||
Record the receipt of cash. | |||
(b) What value will be disclosed in the notes to the year-end financial statements pertaining to the land purchased in Syracuse? (Omit $ sign in your response.)
Value of land disclosed in the notes to the financial statements $ ????????????????
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started