Select Exchange Rate Data:
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Taiwan Dollar – Spot Rate |
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|
Direct Exchange Rate |
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|
20-Nov-12 |
0.0355 |
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|
31-Dec-12 |
0.0375 |
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15-Jan-13 |
0.0365 |
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The initial transaction (November 20, 2012) is recorded below.
|
Direct |
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|
Amount |
Currency |
Exchange Rate |
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|
November 20, 2012 |
Purchased Robots |
29,000,000 |
Taiwan Dollar |
$ 0.0355 |
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|
Date |
Account |
Debit |
Credit |
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|
November 20, 2012 |
Purchas es |
$ 1,029,500 |
29,000,000 |
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|
Accounts Payable |
$ 1,029,500 |
$ 0.0355 |
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|
$ 1,029,500 |
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Q1. The purchasing clerk initially posted the entry using just two decimal places (.04). Why did the Solve Robotics Inc. C.F.O. require the clerk to correct the entry (correct entry above) and use the actual spot rate (.0355) on November 20th?
Q2. What would the U.S. dollar amount been if the entry was not corrected? Show your work. Q3. The November 20, 2012 is defined as the __________________ date.
Q4. Does Solve Robotics Inc. need to make an accounting entry at year-end (balance sheet date)? Explain why or why not. Include in your explanation the impact of the entry on the Income Statement (if any).
|
Direct |
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|
Amount |
Currency |
Exchange Rate |
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|
December 31, 2012 |
Adjust for currency gain/loss at fiscal year end |
29,000,000 |
Taiwan Dollar |
$ 0.0375 |
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|
Date |
Account |
Debit |
Credit |
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|
At 12/31/12 |
At 11/20/12 |
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|
December 31, 2012 |
Transaction Loss |
$ 58,000 |
29,000,000 |
29,000,000 |
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|
Accounts Payable |
$ 58,000 |
$ 0.0375 |
$ 0.0355 |
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|
$ 1,087,500 |
$ 1,029,500 |
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The above entry was made at year-end.
Q5. What is the year ending accounts payable balance (as related to the MiTac purchase)?
The following entry was made on the settlement date.
|
Direct |
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|
Amount |
Currency |
Exchange Rate |
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|
January 15, 2013 |
Settlement of transaction from 11/20/12 |
29,000,000 |
Taiwan Dollar |
$ 0.0365 |
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|
Date |
Account |
Debit |
Credit |
Adj. A/P Balance |
Cash Impact |
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|
At 12/31/12 |
At 1/15/13 |
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|
January 15, 2013 |
Accounts Payable |
$ 1,087,500 |
29,000,000 |
29,000,000 |
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|
Transaction Gain |
$ 29,000 |
$ 0.0375 |
$ 0.0365 |
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|
Cash |
$ 1,058,500 |
$ 1,087,500 |
$ 1,058,500 |
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Q6. What was the income statement impact in 2012? Q7. What was the income statement impact in 2013?
Q8. Why or why not would you recommend Solve Robotics Inc. to hedge similar transactions in the future?
