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Answer:: Date Account Title Debit Credit

El Primero Company purchased inventory from a foreign supplier for 40,000 coronas on December 1, Year 1. Payment was due in 90 days after the inventory was sold. El Primero sold the inventory quickly and paid the full amount owed on February 15, Year 2. The journal entries record the initial purchase on December 1, the foreign exchange gain on December 31, and the foreign exchange loss and final payment on February 15.

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169 views1 page

Answer:: Date Account Title Debit Credit

El Primero Company purchased inventory from a foreign supplier for 40,000 coronas on December 1, Year 1. Payment was due in 90 days after the inventory was sold. El Primero sold the inventory quickly and paid the full amount owed on February 15, Year 2. The journal entries record the initial purchase on December 1, the foreign exchange gain on December 31, and the foreign exchange loss and final payment on February 15.

Uploaded by

Phương Nguyễn Hà
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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On December 1, Year 1, El Primero Company purchases inventory from a foreign supplier for 40,000

coronas. Payment will be made in 90 days after El Primero has sold this merchandise. Sales are
made rather quickly, and El Primero pays this entire obligation on February 15, Year 2. The following
exchange rates for 1 corona apply:
Date U.S. Dollar per Corona
December 1, Year 1 ……………………. $0.87
December 31, Year 1 …………………… 0.82
February 15, Year 2 ……………………. 0.91
Required:
Prepare all journal entries for El Primero in connection with the purchase and payment.

1/28/Y1 Foreign exchange loss $3,600

Accounts payable (coronas) [40,000 x ($.91-$.82)] $3,600

Accounts payable (coronas) $36,400


Cash $36,400

Why is the last journal entry dated 1/28/Y1?

Answer:

Date Account Title Debit Credit

12/1/Year 1          Inventory      $34,800

  Accounts payable                           $34,800

(40,000 x $0.87)

12/31/Year 1       Accounts payable     $2,000

[40,000 x ($0.87-$0.82)]

Foreign exchange gain                           $2,000

2/15/Year 2       Foreign exchange loss      $3,600

Accounts payable             $3,600

[40,000 x ($0.91-$0.82)]

 Accounts payable            $36,400

 Cash                                                   $36,400

The last journal entry is date 2/15/Year2 and not on 1/28/Y1.

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