Assume that your company purchases inventories from a Mexican supplier on December 15. The invoice specifies that payment is to be made on March 15 in Mexican Pesos in an amount of 150,000 Pesos. Your company operates on a calendar year basis.

Assume the following exchange rates and dates:

December 15..$0.04:1 Peso

December 31..$0.05:1 Peso

March 15..$0.06:1 Peso

The journal entries are as follows:

Date	Account	Dr	Cr
15-Dec	Inventory	6,000
	Accounts Payable		6,000
	To record purchase of inventory
31-Dec	Foreign Currency Transaction Loss	1,500
	Accounts Payable		1,500
	To record increase in accounts payable
15-Mar	Accounts Payable	7,500
	Foreign Currency Transaction Loss	1,500
	Cash		9,000
	To record payment of accounts payable

Submission Requirements:

Answer the following:

• Describe the rationale for each entry, utilizing GAAP standards when possible.