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Journal Entries for Foreign Currency Transactions

A U.S. company executed the series of transactions in Mexico during 2007. The suitable exchange rates during 2007 were as follows:

March 1            Bought inventory costing 60,000 pesos on credit.
May 1               Sold 60 percent of the inventory for 54,000 pesos on credit.
August 1          Collected 48,000 pesos from customers.
September 1     Paid 36,000 pesos to creditors.

The suitable exchange rates during 2007 were as follows:

Exchange

      Date                         Rate
March 1, 2007            $0.20 = 1 peso
May 1, 2007               $0.22 = 1 peso
August 1, 2007          $0.23 = 1 peso
September 1, 2007     $0.24 = 1 peso
December 1, 2007       $0.25 = 1 peso

Create all journal entries in U.S. dollars along with any December 31, 2007, adjusting entries. For each journal entry, recognize each transaction properly as either a sale or purchase, with corresponding asset and liability exposure, respectively. Include supporting computation for the amount of each transaction after each account title.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M93749

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