Question

January 25, 2018. Currency 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 2 3 4 Record inventory purchase from foreign supplier Note: Enter debits before credits. Date General Journal Debit Credit 12/15/2015 Record entry Clear entry View general journal

Answer 1

LISBETH COMPANY
Journal Entries
Date	Account Title and Explanation	Debit	Credit
12/15/2017	Purchase	$14,000
	Foreign Currency Accounts Payable		$14,000
	(to record the purchase of merchandise inventory from foreign supplier
	for 50,000 schillings at exchange rate $ 0.28 per schilling)
12/31/2017	Loss on Foreign Currency Translation	$1,000
	Foreign Currency Accounts Payable		$1,000
	(to restate the foreign currency payable amount at the prevailing rate
	as of Dec 31,2017 at the time of closing the books for the year)
1/25/2018	Foreign Currency Accounts Payable	$15,000
	Loss on Foreign Currency Translation	$1,500
	Bank		$16,500
	(to record the payment made to the foreign supplier at the rate prevailing
	on Jan 25,2018 and recording the excess amount paid as translation
	loss)
No entry would be required to be done on Jan 31,2018 because the foreign currency
payable account was already settled on Jan 25,2018
Working Notes
Value of the foreign currency account payable as per the exchange rates
Date	Amount payable in foreign currency(shillings)	Exchange Rate	$ Amount
12/25/2017	50,000	$0.28	$14,000
12/31/2017	50,000	$0.30	$15,000
1/25/2018	50,000	$0.33	$16,500
The final amount paid to the foreign supplier is $ 16,500 against the purchase value
recorded at $ 14,000. The excess amount of $ 2,500 paid is the loss on foreign
currency translation which has been recorded as under:
12/31/2017	Foreign currency translation loss booked to restate the amount payable at the effective exchange rate as applicable on the balance sheet date.The foreign currency account payable is restated to $ 15,000 as per prevailing exchange rate	$1,000
1/25/2018	Foreign currency translation loss booked to match the foreign currency account payable balance after restatement on balance sheet date to the actual amount paid in dollars to clear foreign currency payable	$1,500