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Solve Robotics Inc.is a U.S. company that reconfigures existing robots and sells them to U.S. manufacturers of computer circuit boards. One of their key suppliers isMiTacbased in Taiwan. On November 20, 2012Solve Robotics Inc.purchased 7,000 manufacturing arm robots fromMiTac for 29,000,000 TWD (New Taiwan Dollar). The agreed upon settlement date is January 15, 2013.Select Exchange Rate Data:Taiwan Dollar – Spot RateDirect Exchange Rate20-Nov-120.035531-Dec-120.037515-Jan-130.0365The initial transaction (November 20, 2012) is recorded below.DirectAmountCurrencyExchange RateNovember 20, 2012Purchased Robots29,000,000Taiwan Dollar$ 0.0355DateAccountDebitCreditNovember 20, 2012Purchas es$ 1,029,50029,000,000Accounts Payable$ 1,029,500$ 0.0355$ 1,029,500Q1. The purchasing clerk initially posted the entry using just two decimal places (.04). Why did the Solve Robotics Inc. C.F.O. require the clerk to correct the entry (correct entry above) and use the actual spot rate (.0355) on November 20th?Q2. What would the U.S. dollar amount been if the entry was not corrected? Show your work. Q3. The November 20, 2012 is defined as the __________________ date.Q4. Does Solve Robotics Inc. need to make an accounting entry at year-end (balance sheet date)? Explain why or why not. Include in your explanation the impact of the entry on the Income Statement (if any).DirectAmountCurrencyExchange RateDecember 31, 2012Adjust for currency gain/loss at fiscal year end29,000,000Taiwan Dollar$ 0.0375DateAccountDebitCreditAt 12/31/12At 11/20/12December 31, 2012Transaction Loss$ 58,00029,000,00029,000,000Accounts Payable$ 58,000$ 0.0375$ 0.0355$ 1,087,500$ 1,029,500The above entry was made at year-end.Q5. What is the year ending accounts payable balance (as related to the MiTac purchase)?The following entry was made on the settlement date.DirectAmountCurrencyExchange RateJanuary 15, 2013Settlement of transaction from 11/20/1229,000,000Taiwan Dollar$ 0.0365DateAccountDebitCreditAdj. A/P BalanceCash ImpactAt 12/31/12At 1/15/13January 15, 2013Accounts Payable$ 1,087,50029,000,00029,000,000Transaction Gain$ 29,000$ 0.0375$ 0.0365Cash$ 1,058,500$ 1,087,500$ 1,058,500Q6. What was the income statement impact in 2012? Q7. What was the income statement impact in 2013?Q8. Why or why not would you recommend Solve Robotics Inc. to hedge similar transactions in the future?
