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Journal entries for an account payable denominated in Mexican Pesos ($US weakens) Assume that your company purchases inventories from a Mexican supplier on December 15.

Journal entries for an account payable denominated in Mexican Pesos ($US weakens) 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 (Peso) in the amount of 120,000 Pesos. Your company operates on a calendar year basis.

Assume the following exchange rates:

December 15 $0.080:1 Peso
December 31 $0.090:1 Peso
March 15 $0.095:1 Peso

Prepare the journal entries to record the purchase (assume perpetual inventory accounting), the required adjusting entry at December 31, and the payment on March 15.

General Journal
Date Description Debit Credit
Dec 15 AnswerCashInventoryAccounts payableAccounts receivableForeign currency transaction gainForeign currency transaction loss Answer Answer
AnswerCashInventoryAccounts payableAccounts receivableForeign currency transaction gainForeign currency transaction loss Answer Answer
Dec 31 AnswerCashInventoryAccounts payableAccounts receivableForeign currency transaction gainForeign currency transaction loss Answer Answer
AnswerCashInventoryAccounts payableAccounts receivableForeign currency transaction gainForeign currency transaction loss Answer Answer
Mar 15 Accounts payable Answer Answer
AnswerCashInventoryAccounts payableAccounts receivableForeign currency transaction gainForeign currency transaction loss Answer Answer
AnswerCashInventoryAccounts payableAccounts receivableForeign currency transaction gainForeign currency transaction loss Answer Answer

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