On October 15, 2015, the PDW Corporation, a U. S. Company, agreed to purchase 20
ID: 2500929 • Letter: O
Question
On October 15, 2015, the PDW Corporation, a U. S. Company, agreed to purchase 20,000 small engines from a Mexican supplier for a total invoice price of 18,000,000 pesos ($MXN). The engines are received on December 15 and payment is made on February 15, 2016. Concurrently, on October 15, 2015, PDW purchased 18,000,000 $MXN for delivery on February 15, 2016, for payment of the invoice price. PDW closes it books on December 31. Relevant exchange rates are as follows:
Forward Rate
Spot Rate February 15 delivery
October 15, 2015 $0.0132 $0.0134
December 15, 2015 0.0138 0.0140
December 31, 2015 0.0142 0.0144
February 1, 2016 0.0146 0.0146
Prepare the journal entries made by PDW to record the above events including any year-end adjusting entries.
Explanation / Answer
Journal Entries:
On 31st Dec. 2015: Value of Payables = 18,000,000 x 0.0142 = 255,600
Loss= 255600 - 237600 = 18000
On Feb 15, 2016 = 0.0146 x 18,000,000 = 262,800
Loss: 262,800 - 255,600 = 7200
Date Account Title Debit Credit Oct 15,2015 Purchase 237,600 Account Payable 237,600 Dec 31, 2015 Foreign Exchange Loss 18,000 Account Payable 18,000 Feb 15, 2016 Account Payable 255,600 Foreign Exchange Loss 7,200 Cash 262,800Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.