Question

1. Germany athletic company Adidas makes a sale of goods to a retailer in Chile on September 15, 20X1. The Chilean retailer agrees to pay 100,000 Chilean pesos for the goods. Their payment is due one month after the sale on October 15, 20X1.   Adidas prepares quarterly reports.

Date	Spot Rate (1 Chilean peso to Euro)
09/15/X1	0.40€
09/30/X1	0.42€
10/15/X1	0.37€

Please prepare the journal entries for this transaction
(you can take a picture of your solution written by hand and insert it, if it is easier)

Answer 1

Journal Entries (In Adidas books)

On Sale (09/15/20x1)

Accounts receivable €40,000

Sales €40,000

(Sale of goods for a buyer in Chile for 100,000 Chilean peso recorded)

At quarter end (09/30/20x1)

Accounts receivable €2,000

Foreign exchange gain €2,000

(The difference between transaction date exchange and quarter end edchnage rate is recognised as gain 100,000 (0.42-0.40))

On payment (10/15/20x1)

Cash a/c €37,000

Foreign exchange loss €5,000

Accounts receivable €42,000

(The payment received from customer and the foreign exchange loss accounted. Received 100,000 x 0.37)