Importing transactions-journal entries. Striking Furs imports furs from Cananda.
ID: 2424646 • Letter: I
Question
Importing transactions-journal entries.
Striking Furs imports furs from Cananda. Prepare journal entries to record the following events.
Dec. 11, 2014: Purchased furs from Capable Trappers, Ltd., a Candadian corporation, at a price of $25,000 Candadian dolars, due in 60 days. The current exchange rate is $0.85 U.S. dollars per Candadian dollar. (Striking uses the perpetual inventory method; debit the Inventory account.)
Dec. 31, 2014: Striking made a year-end adjusting entry relating to the account payable to Capable Trappers. The exchange rate at year-end is $0.89 U.S. dollars per Candadian dollar.
Feb. 9, 2015: Issued a check for $21,750 (U.S. dollars) to National Bank in full settlement of the liability to Capable Trappers, Ltd. The exchange rate at this date is $0.87 U.S. dollars per Candadian dollar.
Explanation / Answer
Date
Account title and explanations
Debit
Credit
Dec 11, 2014
Inventory
$ 21,250.00
Accounts payable
$ 21,250.00
($25000 * 0.85)
Dec 31, 2014
Loss on Fluctuations in Foreign Exchange Rates
$ 1,000
Accounts payable
$ 1,000
Original account balance
$ 21,250.00
Adjusted balance ($25000 x 0.89)
$ 22,250.00
Required adjustment (loss)
$ 1,000.00
Feb 9, 2015
Accounts Payable (WMB Motors)
$ 22,250.00
Cash
$ 21,750.00
Gain on Fluctuations in Foreign Exchange Rates
$ 500.00
Account payable, adjusted balance
$ 22,250.00
Amount paid
$ 21,750.00
Gain from decline in exchange rate
$ 500.00
Date
Account title and explanations
Debit
Credit
Dec 11, 2014
Inventory
$ 21,250.00
Accounts payable
$ 21,250.00
($25000 * 0.85)
Dec 31, 2014
Loss on Fluctuations in Foreign Exchange Rates
$ 1,000
Accounts payable
$ 1,000
Original account balance
$ 21,250.00
Adjusted balance ($25000 x 0.89)
$ 22,250.00
Required adjustment (loss)
$ 1,000.00
Feb 9, 2015
Accounts Payable (WMB Motors)
$ 22,250.00
Cash
$ 21,750.00
Gain on Fluctuations in Foreign Exchange Rates
$ 500.00
Account payable, adjusted balance
$ 22,250.00
Amount paid
$ 21,750.00
Gain from decline in exchange rate
$ 500.00