Question

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.
Argentina
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.

Answer 1

Sl. No.	Particulars	Debit	Credit
1	Inventory A/c        Dr	3,20,000.00
	To Accounts Payable A/c		3,20,000.00
	(To record purchase of inventory)
2	Foreign Currency A/c      Dr	3,10,800.00
	To Cash A/c		3,10,800.00
	(To record purchase sufficient foreign currency to pay supplier)
3	Accounts Payable A/c      Dr	3,20,000.00
	To Foreign Currency A/c		3,10,800.00
	To Gain A/c		9,200.00
	(To record payment of liability to supplier)
	Total	9,50,800.00	9,50,800.00

Working Note:

1. Total Inventory

Country	Amount	Spot rate at Purchase	Inventory
Argentina	2,50,000.00	0.06	15,000.00
Canada	4,00,000.00	0.732	2,92,800.00
India	3,00,000.00	0.016	4,800.00
South Africa	1,00,000.00	0.074	7,400.00
	Total Inventory		3,20,000.00

2. Total Foreign Currency

Country	Amount	Spot rate at Payment	Foreign Currency
Argentina	2,50,000.00	0.05	12,500.00
Canada	4,00,000.00	0.713	2,85,200.00
India	3,00,000.00	0.018	5,400.00
South Africa	1,00,000.00	0.077	7,700.00
	Total Foreign Currency		3,10,800.00

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