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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