Ulysses Company purchases goods from China amounting to 372,372 Yuan (the transaction is denominated in the Chinese Yuan).Assume the Yuan is trading at $0.154 at the date the goods are ordered,and the Yuan is trading at $0.155 at the date the goods are received,and when the invoice is paid a month later,the Yuan is trading at $.156.Assume all three dates are in the same fiscal year.Which of the following is true?
A)The entry to record the payment will include a gain of $744.74.
B)The entry to record the payment will include a gain of $372.37.
C)The entry to record the purchase will include a credit to Accounts Payable of $57,345.29.
D)The entry to record the purchase will include a credit to Accounts Payable of $57,717.66.

Question

Quizplus · Accepted Answer

To record the purchase:

- Debit Purchases: $57,345.29 (372,372 Yuan x $0.154)
- Credit Accounts Payable: $57,717.66 (372,372 Yuan x $0.155)

To record the payment:

- Debit Accounts Payable: $57,717.66
- Credit Cash: $57,962.40 (372,372 Yuan x $0.156)
- Credit Gain on Foreign Exchange: $244.74 ([$57,962.40 - $57,717.66] - $372.37 Cost of Goods Sold adjustment)

Therefore, the entry to record the payment will include a gain of $244.74 (option A is incorrect) and option B is incorrect since the $372.37 mentioned should be included in the gain on foreign exchange account. Option C is incorrect as it relates to the entry to record the purchase. Option D is the correct answer.

Ulysses Company Purchases Goods from China Amounting to 372,372 Yuan