Wilson Inc.purchased merchandise on account from a French supplier on December 1, 2010.This transaction was for 75, 000 euros.Wilson's accounting year ends December 31.Payment was made on January 31, 2011.The exchange rates during this period were as follows:
$\begin{array}{ll}\text { December } 1 & \$ 1.10 / \text { euro } \\\text { December } 31 & 1.16 / \text { euro } \\\text { J quuary } 31 & 1.14 / \text { euro }\end{array}$ Required:
Prepare the necessary journal entries to record this purchase and subsequent payment.

Question

Wilson Inc.purchased merchandise on account from a French supplier on December 1, 2010.This transaction was for 75, 000 euros.Wilson's accounting year ends December 31.Payment was made on January 31, 2011.The exchange rates during this period were as follows:

\begin{array}{ll}\text { December } 1 & \$ 1.10 / \text { euro } \\\text { December } 31 & 1.16 / \text { euro } \\\text { J quuary } 31 & 1.14 / \text { euro }\end{array}

Required:
Prepare the necessary journal entries to record this purchase and subsequent payment.

Spiritual Motivation · Accepted Answer

Final Answer :  \begin{array}{lll}	ext { Dec. } 1  &  	ext { Inventory (Purchases) }  &  82,500^{*} \ & &  	ext { Accounts Payable }  &  82,500\ & * & \$ 75,000  ' \$ 1.10\\	ext { Dec. } 31  &  	ext { Exchange Loss }  &  4,500* \ & &  	ext { Accounts Payable } & 4,500\ & * & (\$ 1.16-\$ 1.10)^{\prime} 75,000\\	ext { Jan. } 31  &  	ext { Accounts Payable }  &  87,000  &  \ & &  	ext { Cash }  &  85,500^{*} \ & &  	ext { Exchange Gain }  &  1,500\ & * & \$ 1.14  '  75,000\end{array}

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