Foreign Currency
Exchange Gains and Losses
Illustrative Entries
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12-1-X1 |
Accounts Receivable |
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175,000 |
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Sales |
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175,000 |
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Sold goods to a customer in England, agreeing to accept 100,000 British pounds (100,000 pounds X $1.75 spot rate = $175,000)
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12-31-X1 |
Accounts Receivable |
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15,000 |
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Currency Exchange Gain |
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15,000 |
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Year-end adjustment to increase accounts receivable to the spot rate (100,000 pounds X $1.90 spot rate = $190,000; $190,000 - $175,000 = $15,000 gain)
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2-28-X2 |
Cash |
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170,000 |
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Currency Exchange Loss |
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20,000 |
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Accounts Receivable |
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190,000 |
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Collected 100,000 pounds and converted them to dollars (100,000 x $1.70 spot rate). Recorded loss for decline in value of receivable since year end ($190,000 vs.$170,000)
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