Journal entries for an account payable denominated in Mexican Pesos (SUS weakens
ID: 2565996 • Letter: J
Question
Journal entries for an account payable denominated in Mexican Pesos (SUS weakens) Assume that your company purchases inventories from a 15 in Mexican Pesos (Peso) in the amount of 100,000 Pesos Your company operates on a calendar year basis. Assume the following exchange rates: December 15 $0.0801 Peso Mexican supplier on December 15. The invoice specifies that payment is to be made on March December 31 $0.090:1 Pesco March 15 $0.095:1 Peso Prepare the journal entries to record the purchase (assume perpetual inventory accountingl, the required adjusting entry at December 31 payment on March 15 General journal Date Dec 15 Inventory Accounts payable 1000 Dec 31 Foreign currency transaction loss 1000 Accounts payable Mar 13 Accounts payable 500 Foregn currency transaction loss Please answer al parts of the questsonExplanation / Answer
Explanations:
Amount of accounts payable on 15th December = 100,000 Pesos*0.080 = $8,000
On 31st December USD depreciates against Pesos and this will result in loss. Loss amount = ((0.090 - 0.080)*100,000 = 1,000
On 15th March when payment is paid the exchange rate is $0.095:1 Peso. Thus total cash payment = 100,000*0.095 = 9500 USD
Loss = (0.095-0.090)*100,000 = $500
Date Description Debit Credit 15-Dec Inventory 8,000.00 Accounts payable 8,000.00 31-Dec Foreign currency transaction loss 1,000.00 Accounts payable 1,000.00 15-Mar Accounts payable 9,000.00 Foreign currency transaction loss 500.00 Cash 9,500.00Related Questions
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