Question

On August 1, 2019, Chidi Inc. ordered merchandise from a supplier in US for US$300,000 with delivery scheduled for November 30, 2019. Payment is due on delivery. On August 2, 2019, Chidi entered a forward contract with Royal Bank to exchange currencies on November 30, 2019 at a rate of US1= $1.356. Chidi's year-end is August 31. On November 30, 2019, Chidi paid the foreign supplier in full and settled the forward contract. Exchange rates were as follows: Spot Rates Forward Rates August 1 and 2, 2019 US1= $1.320 US1= $1.356 August 31, 2019 US1= $1.310 US1= $1.347 November 30, 2019 US1= $1.367 US1= $1.367

Required: Prepare all necessary journal entries to record the transactions described above.

Answer 1

Journal Entries: -

Date	Particulars	Dr. / Cr.	Amount (in $)
01 Aug, 19	Merchandise A/c	Dr.	3,96,000
	Supplier A/c	Cr.	3,96,000
	(Being purchase made - $3,00,000 x 1.320)
02 Aug, 19	No Entry
31 Aug, 19	Forward contract assets A/c	Dr.	2,700
	P&L A/c / OCI (Gain on forward contract A/c)	Cr.	2,700
	[ $3,00,000 x (1.356 - 1.347) ]
30 Nov, 19	Supplier A/c	Dr.	4,10,100
	Bank A/c	Cr.	4,10,100
	( Being payment made to supplier)
30 Nov, 19	P&L A/c (Loss on settlement of supplier a/c)	Dr.	14,100
	Supplier A/c	Cr.	14,100
	(Being loss booked for due to change in exchange rate)
30 Nov, 19	Bank A/c	Dr.	6,000
	Forward contract assets A/c	Cr.	2,700
	P&L A/c (Gain on settlement of Forward Contract)	Cr.	3,300
	(Being gain recorded in settlement of contract)