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Merchant Company had the following foreign currency transactions: On November 1, 20X6, Merchant sold goods to a company located in Munich, Germany. The receivable was
Merchant Company had the following foreign currency transactions:
- On November 1, 20X6, Merchant sold goods to a company located in Munich, Germany. The receivable was to be settled in European euros on February 1, 20X7, with the receipt of 240,000 by Merchant Company.
- On November 1, 20X6, Merchant purchased machine parts from a company located in Berlin, Germany. Merchant is to pay 120,000 on February 1, 20X7.
The direct exchange rates are as follows:
November 1, 20X6 | 1 = $ | 0.60 | |
December 31, 20X6 | 1 = $ | 0.62 | |
February 1, 20X7 | 1 = $ | 0.58 | |
Required: Record the T-accounts for the following transactions (Record the transactions in the given order.)
- The November 1, 20X6, export transaction (sale).
- The November 1, 20X6, import transaction (purchase).
- The December 31, 20X6, year-end adjustment required of the foreign currencydenominated receivable of 240,000.
- The December 31, 20X6, year-end adjustment required of the foreign currencydenominated payable of 120,000.
- The February 1, 20X7, adjusting entry to determine the U.S. dollarequivalent value of the foreign currency receivable on that date.
- The February 1, 20X7, adjusting entry to determine the U.S. dollarequivalent value of the foreign currency payable on that date.
- The February 1, 20X7, settlement of the foreign currency receivable.
- The February 1, 20X7, settlement of the foreign currency payable.
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