Barlett Company, headquartered in Cincinatti, Ohio, has occassional transactions

Question

Barlett Company, headquartered in Cincinatti, Ohio, has occassional transactions with companies in a foreign country whose currency is the lira.

Transactions in 2015:

Transactions in 2016:

Currency Exchange Rates for 1 lira for 2015:

Currency Exchange Rates for 1 lira for 2016:

Prepare jounal entries for the following transactions in US 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. Show calculations.

February 1 Bought equipment for 51,000 lira on credit April 1 Paid for the equipment purchased February 1 June 1 Bought inventory for 63,000 lira on credit August 1 Sold 70 percent of inventory purchased June 1 for 51,000 lira on credit October 1 Collected 40,800 lira from the sales made on August 1, 2015 November 1 Paid 42,000 lira on the debts incurred on June 1, 2015

Explanation / Answer

JOURNAL REGISTER Date Particulars Debit Credit 01-Feb Equipment $                          22,950.00 Note payable(51000lira*$0.45) $                    22,950.00 01-Apr Note payable. $                          22,950.00 Foreign Exchange Loss $                               510.00 Cash (51000lira*$.46) $                    23,460.00 01-Jun Inventory (63000*0.48) $                          30,240.00 Accounts payable $                    30,240.00 01-Aug Accounts Receivable $                          24,990.00 sales $                    24,990.00 Cost of Goods Solf $                          21,168.00 Inventroy $                               21,168.00 01-Oct Cash $                          20,400.00 Accounts Receivable (24990*.80) $                    19,992.00 Exchange gain $                         408.00 01-Nov Accounts payable ($30240*42000/63000) $                          20,260.80 Exchange loss $                            1,159.20 Cash(42000*.51) $                    21,420.00 31-Dec Accounts Receivable.( 45000-36000)lira*($0.47-0.43) $                               360.00 Exchange gain /loss $                           7,140.00 Accounts payable (45000-30000)lira*(0.47-0.42) $                      7,500.00 01-Feb Cash (9000*0.49) $                           4,410.00 Accounts Receivable (9000*0.47) $                      4,230.00 Exchange gain /loss $                          180.00 01-Mar Accounts payable (15000*0.47) $                           7,050.00 Exchange gain /loss $                               450.00 Cash(15000*0.50) $                      7,500.00

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