Assume that company A purchases inventories from a Mexican
supplier on December 15. The invoice specifies that payment
is to be made on March 15 in Mexican Pesos in the amount of 150,000
Pesos. Assume the following exchange rates and dates:
December 15……………..$0.04:1 Peso
December 31……………..$0.05:1 Peso
March 15…………………..$0.06:1 Peso
- Option 1 Exchange Rates Assume That Company A Purchases Inventories From A Mexican Supplier On December 15 The Invoi 1 (35.22 KiB) Viewed 50 times
- Option 1 Exchange Rates Assume That Company A Purchases Inventories From A Mexican Supplier On December 15 The Invoi 2 (124.07 KiB) Viewed 50 times
following:
1. The journal entry by company A on December 15, the
adjusting entry on December 31, and the payment entry on March 15.
(Are the below journal entries correct)
2. Note an explanation of the transaction after each
journal entry (Are notes are correct)
3. Describe the rationale for each entry, utilizing GAAP
standards when possible (Need help with explanation)
150,000 Pesos to be paid by your company on March 15. Exchange Rates: December 15 December 31 March 15 $0.040:1 Peso $0.050:1 Peso $0.060:1 Peso Date Account Dr Cr 15-Dec 31-Dec 15-Mar
Date Account titles & explanation Debit $ Credit $ Dec-15 6,000 6,000 - Inventories (150,000 $0.04) Accounts payable (To record purchase of inventories when 1 Peso = $ 0.04) Foreign currency transaction loss Accounts payable (To record increase in Accounts Payable to $0.05) (150,000 $0.05- $6,000) Dec-31 1,500 1,500 Mar-15 7,500 Accounts Payable Foreign currency transaction loss (150,000 $0.06- $7,500) Cash (150,000 $0.06) (To record payment of the accounts payable at $0.06) 1,500 9,000