Question

26. On December 15, 2017, Lisbeth Inc. (a U.S. company) purchases merchandise inventory from a foreign supplier for 50,000 schillings. Lisbeth agrees to pay in 45 days after it sells the merchan- dise. Lisbeth makes sales rather quickly and pays the entire obligation on January 25, 2018. Cur- rency exchange rates for 1 schilling are as follows: December 15, 2017 December 31, 2017 January 25, 2018 January 31, 2018 $0.28 0.30 0.33 0.34 Prepare all journal entries for Lisbeth Company in connection with this purchase and payment.

Answer 1

Answer :

Journal Entry to purchase transaction

Date	Particulars	Debit ($)	Credit ($)
Dec 15.2017	Merchandise inventory	14,000	-
	Accounts payable (50,000*$0.28)	-	14,000
	(To Record purchase of inventory)	-	-

Journal entry at year end for change in exchange rate

Date	Particulars	Debit ($)	Credit ($)
Dec 31.2017	Foreign exchange loss 50,000*($0.30 - $0.28)	1,000	-
	Accounts payable	-	1,000
	(To Record changes in foreign exchange rate at year end)	-	-

Journal entry for payment to the supplier

Date	Particulars	Debit ($)	Credit ($)
	Foreign exchange loss 50,000*($0.33 - $0.28)	1,500	-
	Accounts payable	15,000	-
	Cash	-	16,500
	(To Record payment to supplier)

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