prepare any necessary entries in e s financial statements as at dec 31 01 e intends 612662

Foreign currency transactions – testing for impairment

On Dec 31, 01, merchandise is stored in entity E”s warehouse. This merchandise was acquired from a foreign supplier located in country C for 10 m foreign currency units and delivered on Nov 15, 01. E”s functional currency is the yen. The exchange rate was 10 at the date of the transaction and is 8 on Dec 31, 01. The quotes are direct (1 foreign currency unit = x yen).

Required

Prepare any necessary entries in E”s financial statements as at Dec 31, 01. E intends to sell the merchandise after the reporting period:

(a) In country C for 11 m foreign currency units.

(b) Domestically for 95 m yen.

For simplification purposes it is assumed that no costs will be incurred with respect to the sale of the inventories after the reporting period.