Journal Questions
Question – 1
Prepare journal entries, general ledger, trial balance, income statement, and balance sheet for the following scenarios.
ADR Conversion to Local Equity Shares—BRL
Mark Antony Inc. traded in Bovespa shares in a Brazilian Stock Exchange through Henry Frank Brothers brokers and the details are as follows.
Trade Details
Date Product CCY Quantity Rate B/S Brokerage
15-Jan-X1 Bovespa—ADR US$ 9,000 32.00 B US$ 900
28-Jan-X1 Bovespa—ADR US$ 5,000 35.00 B US$ 525
5-Feb-X1 Bovespa—Local BRL 15,000 28.50 S BRL 1,280
Other Details
One ADR converts to two local shares in BRL currency.
Settlement: T + 2.
Conversion fees levied by broker to convert ADR shares into local shares for 7,500 ADRs amounts to $1,300.
Functional currency is US$.
Liquidation Methodology
FIFO
FX Rates
Date FX Rate
11-Jan-X1 1.6505
13-Jan-X1 1.6525
25-Jan-X1 1.6484
27-Jan-X1 1.6444
31-Jan-X1 1.6311
5-Feb-X1 1.6255
7-Feb-X1 1.6201
28-Feb-X1 1.6150
Market Rate
Bovespa ADR
January 31: $33.50
February 28: $38.00
Bovespa Local
January 31: BRL 26.25
February 28: BRL 32.50
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Question – 2
ADR Conversion to Local Equity Shares—MXN
Mexico Opportunities Fund traded in America Movil shares in a Mexican Stock Exchange through Goldman Sachs and the details are as follows.
Trade Details
Date Product CCY Quantity Rate B/S Brokerage
12-Jan-X1 America Movil—ADR US$ 1,500 51.50 B US$ 200
22-Jan-X1 America Movil—ADR US$ 3,500 52.50 B US$ 700
24-Jan-X1 America Movil—ADR US$ 1,800 53.50 S US$ 260
5-Feb-X1 America Movil—Local MXN 30,000 57.50 S MXN 5,200
Other Details
One ADR converts to 10 local shares in MXN currency.
Settlement: T + 2.
Conversion fees levied by broker to convert ADR shares into local shares amount to $810.
Functional currency is US$.
Liquidation Methodology
Weighted average
FX Rates
Date FX Rate
11-Jan-X1 10.6505
13-Jan-X1 10.6525
25-Jan-X1 10.6484
28-Jan-X1 10.6444
31-Jan-X1 10.6311
5-Feb-X1 10.6255
7-Feb-X1 10.6201
28-Feb-X1 10.6150
Market Rate
America Movil ADR
January 31: $54.50
February 28: $53.00
America Movil Local
January 31: MXN 58.00
February 28: MXN 55.00
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