Bartlett Company, headquartered in Cincinnati, Ohio, has occasional transactions
ID: 2351425 • Letter: B
Question
Bartlett Company, headquartered in Cincinnati, Ohio, has occasional transactions with companies in a foreign country whose currency is the lira.Transactions in 2013
February 1 Bought equipment for 48,000 lira on credit.
April 1 Paid for the equipment purchased February 1.
June 1 Bought inventory for 54,000 lira on credit.
August 1 Sold 70 percent of inventory purchased June 1 for 48,000 lira on credit.
October 1 Collected 36,000 lira from the sales made on August 1, 2013.
November 1 Paid 36,000 lira on the debts incurred on June 1, 2013.
Transactions in 2014
February 1 Collected remaining 12,000 lira from August 1, 2013, sales.
March 1 Paid remaining 18,000 lira on the debts incurred on June 1, 2013.
Currency exchange rates for 1 lira for 2013
February 1 $ 0.42
April 1 0.43
June 1 0.45
August 1 0.46
October 1 0.47
November 1 0.48
December 31 0.50
Currency exchange rates for 1 lira for 2014
February 1 $ 0.52
March 1 0.53
Prepare journal entries for the following transactions in U.S. dollars. Also prepare any necessary adjusting entries at December 31 caused by fluctuations in the value of the lira. Assume that the company uses a perpetual inventory system. (Do not round intermediate calculations.)
Explanation / Answer
Accounts Payable (L) [40,000 $.44] = $17,600 4/1/11
Cash [40,000 $.45] = $18,000 6/1/11
Accounts Payable (L) [30,000 $.47] = $14,100 8/1/11
Accounts Receivable (L) [40,000 $.48] = $19,200
Inventory [$14,100 70%] = $9,870 10/1/11
Cash [30,000 $.49] = $14,700
Accounts Receivable (L) [$19,200 3/4] = $14,400 11/1/11
Accounts Payable (L) [$14,100 2/3] = $9,400
Foreign Exchange Loss [20,000 ($.50 $.47)] = 600
Cash [20,000 x $.50] 12/31/11
Accounts Payable (L) [10,000 ($.52 $.47)] = $500
Accounts receivable (L) [10,000 ($.52 $.48)] = $400 2/1/12
Cash [10,000 $.54] = $5,400
Accounts Receivable (L) [10,000 $.52] = $5,200 3/1/12
Accounts Payable (L) [10,000 $.52] = $5,200 Cash [10,000 $.55] = $5,500 5,500
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