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Question #6: Garden Grove Corporation made an export sale of goods to a French customer on September 15, 2015, for 100,000 Euros. Payment was subsequently received on October 15, 2015. The following exchange rates apply: Date U.S. Dollar per Euro September 15, 2015 ............................................ $0.40 September 30, 2015 ............................................ 0.42 October 15, 2015 ................................................. 0.37 Required: Prepare all journal entries for Garden Grove Corporation in connection with this sale, assuming that the company closes its books on September 30th to prepare interim financial statements: September 15, 2015: Sale and recording of receivable Debit Credit ___________________________________________________________________________________________________________ September 30, 2015: Revaluation of receivable based on rate on 09-30-15 Debit Credit ___________________________________________________________________________________________________________ October 15, 2015: Revaluation of receivable based on change of rate between Sept. 30 & Oct. 15. Record receipt of cash from French customer and settlement of receivable. Debit Credit Debit Credit Question #7: On October 1, 2015, Dell Corporation purchases inventory from a Mexican supplier for 220,000 Mexican Pesos. Dell will make payment in 240 days after it has sold the merchandise. Sales are made rather quickly and Dell pays this entire obligation on March 16, 2016. The following exchange rates for 1 peso apply: Date U.S. Dollar per Mexican Peso October 1, 2015 .................................................... $0.054 December 31, 2015 ............................................. 0.047 March 16, 2016 .................................................... 0.057 Required: Prepare all journal entries for Dell in connection with the purchase and payment: October 1, 2015: Purchase of inventory & recording of payable Debit Credit ___________________________________________________________________________________________________________ December 31, 2015: Revaluation of payable based on current rate Debit Credit ___________________________________________________________________________________________________________ March 16, 2016: Revaluation of payable based on change between Dec. 31 rate - Mar. 16 rate. Record payment of cash to supplier and settlement of payable. Debit Debit Chapter 8 Questions Credit Credit Translation of Foreign Currency Financial Statements Multiple Choice ______ 8. Which of the following items is normally translated the same way under both the current rate method and temporal methods of foreign currency financial statement translation? a. Inventory b. Sales revenue c. Depreciation expense d. All of the above ______ 9. In translating the financial statements of a foreign subsidiary into the parent's reporting currency under the current rate method, which of the following statements is true? a. Expenses are translated using a combination of current and historical exchange rates. b. Intangible assets are translated at the historical exchange rates in effect on the date the assets are purchased. c. The translation adjustment is a function of the foreign subsidiary's net assets. d. The translation adjustment is a function of the relative amount of monetary assets and monetary liabilities held by the foreign subsidiary ______ 10. What-How is based in Hong Kong. A foreign subsidiary of What-How located in Sweden has one asset (inventory) and no liabilities. The Swiss subsidiary operates with a significant degree of autonomy from What-How and primarily uses its host country's currency (Swiss Franc) in carrying out its transactions. Since the date the inventory was acquired, the Swiss Franc has decreased in value in relation to What-How's reporting currency. In translating the foreign subsidiary's Swiss Franc financial statements into the parent's reporting currency, which of the following is true? a. A translation gain must be reported in net income. b. A positive translation adjustment must be reported in stockholders' equity. c. A negative translation adjustment must be reported in stockholders' equity. d. A translation loss must be reported in net income