Question

In: Accounting

Pinnacle Foods imports a variety of items for resale to U.S. retailers. Following is a description...

Pinnacle Foods imports a variety of items for resale to U.S. retailers. Following is a description of purchases and foreign-currency-denominated payments made in the last accounting period, plus the direct exchange rates for each date:
Country Amount Currency Spot rate at
purchase
Spot rate
at payment
Argentina 250,000 Peso $0.06 $0.05
Canada 400,000 Dollar 0.732 0.713
India 300,000 Rupee 0.016 0.018
South Africa 100,000 Rand 0.074 0.077
Required

Prepare the journal entries made by Pinnacle, a U.S. company, to record the above purchase and payment transactions.

South Africa
Description Debit Credit
A/p OR Cash OR Gain OR Loss Or Forgein Currency or Inventory ? ?
A/p OR Cash OR Gain OR Loss Or Forgein Currency or Inventory ? ?

To record purchase of inventory

A/p OR Cash OR Gain OR Loss Or Forgein Currency or Inventory ? ?
A/p OR Cash OR Gain OR Loss Or Forgein Currency or Inventory ? ?

To record purchase sufficient foreign currency to pay supplier.

A/p OR Cash OR Gain OR Loss Or Forgein Currency or Inventory ? ?
A/p OR Cash OR Gain OR Loss Or Forgein Currency or Inventory ? ?
Foreign Currency ? ?

To record payment of liability to supplier.

Solutions

Expert Solution

No. Description Debit Credit
1 Inventory (250000*.06) $    15,000.00
A/P $    15,000.00
(To record purchase of Inventory)
2 Forgein Currency (250000*.05) $    12,500.00
Cash $    12,500.00
(To Record Purchase of FC)
3 A/P $    15,000.00
Gain $      2,500.00
Forgein Currency $    12,500.00
(To Record Payment)
No. Description Debit Credit
1 Inventory (400000*0.732) $ 2,92,800.00
A/P $ 2,92,800.00
(To record purchase of Inventory)
2 Forgein Currency (400000*0.713) $ 2,85,200.00
Cash $ 2,85,200.00
(To Record Purchase of FC)
3 A/P $ 2,92,800.00
Gain $      7,600.00
Forgein Currency $ 2,85,200.00
(To Record Payment)
No. Description Debit Credit
1 Inventory (300000*0.016) $      4,800.00
A/P $      4,800.00
(To record purchase of Inventory)
2 Forgein Currency (300000*0.018) $      5,400.00
Cash $      5,400.00
(To Record Purchase of FC)
3 A/P $      4,800.00
Loss $         600.00
Forgein Currency $      5,400.00
(To Record Payment)
No. Description Debit Credit
1 Inventory (100000*0.074) $      7,400.00
A/P $      7,400.00
(To record purchase of Inventory)
2 Forgein Currency (100000*0.077) $      7,700.00
Cash $      7,700.00
(To Record Purchase of FC)
3 A/P $      7,400.00
Loss $         300.00
Forgein Currency $      7,700.00
(To Record Payment)

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