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.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 determine the accounting entries, we need to convert the amounts from Yuan into US dollars using the given exchange rates.

- At the date of the order: $1 = 6.49 Yuan (0.154 * 42) 
- At the date of the receipt: $1 = 6.45 Yuan (0.155 * 42) 
- At the date of payment: $1 = 6.41 Yuan (0.156 * 41)

1. To record the purchase: 
Accounts Payable 57,717.66 
(372,372 Yuan / 6.45)

2. To record the payment: 
Accounts Payable 57,717.66 
Cash (372,372 Yuan / 6.41) 58,064.16 
Realized gain on foreign exchange 346.50 
(58,064.16 - 57,717.66)

Therefore, the correct answer is (D) The entry to record the purchase will include a credit to Accounts Payable of $57,717.66.

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