Question
Case 16-15 Measurement and Settlement of a Monetary Liability Eagle Company is a U.S. corporation that...
Case 16-15 Measurement and Settlement of a Monetary Liability
Eagle Company is a U.S. corporation that uses the U.S. dollar
(USD) as its reporting currency.
On July 1, 2017 Eagle Company purchases office computers
(capitalized assets) on account
from John Bull Company for 10,000 British pound sterling (GBP). The
exchange rate on July
1, 2017 is USD 1.4 = GBP 1.0.
Eagle Company issues quarterly fmancial statements on September 30, 2017, and pays its GBP 10,000 account payable to John Bull Company on October 15, 2017.
The exchange rates are shown in the following table:
Date Exchange rate
July 1, 2017 USD 1.3 = GBP 1.0
September 30, 2017 USD 1.2 = GBP 1.0
October 15,2017 USD 1.1 = GBP 1.0
Required:
How should Eagle Company measure and record this foreign currency transaction:
a. In its quarterly financial statements for the quarter ended on September 30, 2017?
b. Upon settlement of its account payable on October 15, 2017?
Homework Answers
Answer #1
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