Adjusting Entry at Balance Sheet Date

Yum! Brands, Inc. has the following receivables and payables denominated in foreign currencies, prior to closing on December 31. The spot rates at December 31 are also given.

Item Current $ balance FC balance December 31 spot rate
1. Receivable $65,000 1,000,000 Mexican pesos $0.06
2. Receivable 165,000 225,000 Canadian dollars 0.75
3. Payable 556,000 400,000 Jordan dinar 1.41
4. Payable 56,000 200,000 Saudi Arabian riyal 0.27

Prepare the adjusting entry recorded by Yum! Brands at December 31.

Question

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anijesuajayi anijesuajayi · Answer 1 · 2020-02-06T11:08:46+01:00

Answer:

The entries are prepared and explained in the explanations.

Explanation:

The question is to prepare the adjusting entries recorded by Yum! Brand

Number 1:

Account Items Debit Credit

Cash $60,000

Foreign Exchange loss $5,000

Accounts Receivable $65,000

(1,000,000 x 0.06= $60,000

65,000 - 60,000= $5,000 loss)

Number 2:

Account Items Debit Credit

Cash $168,750

Account Receivable $165,000

Foreign Exchange gain $3,750

225,000 x 0.75= 168, 750

$168,750- $165,000 = $3,750

Number 3:

Account Items Debit Credit

Accounts Payable $556,000

Foreign Exchange loss $8,000

Cash $564,000

400,000 x $1.41 = $564,000

564,000-556,000= $8,000

Number 4:

Account Items Debit Credit

Accounts Payable $56,000

Foreign Exchange gain $2,000

Cash $54,000

200,000 x $0.27= $54,000

56,000- 54,000=$4000