USA Dog Coats had the following foreign transactions during 20X8:
- USA Dog Coats purchased 5,000 zippers on December 2 from ZipIt, Inc., a firm based in Mexico, at an invoice price of 2,500 pesos. The spot rate was $0.069. Payment is due January 2, 20X9.
- USA Dog Coats sold 700 dog coats on December 20 to Glorious Goldens, a pet shop in Canada, for $1,200 Canadian dollars. The spot rate was $0.815. The invoice is calculated in Canadian dollars and is due on January 20, 20X9.
- On December 31, 20×8, the currency exchange rate for pesos was $0.073 and for Canadian dollars was $0.80.
- The exchange rate for pesos on January 2, 20×9 was $0.0735, and the exchange rate for Canadian dollars on January 20, 20×9 was $0.810.
Prepare the following journal entries:
- Prepare a journal entry for USA Dog Coats to reflect the above accounting events.
- Prepare a journal entry for the adjusting journal entries necessary for December 31, 20×8.
- Prepare a journal entry to record the payment of the invoice to ZipIt and to record the receipt of the Glorious Goldens’ payment.
Provide a discussion of the following:
- Explain the 3 stages of concern for accountants when dealing in foreign currency transactions.
- What would be some example issues of these stages of concern if they were not properly addressed?
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