Problem - Bartlett Company, headquartered in Cincinnati Ohio, has occasional transactions with companies in a foreign country whose currency is the lira. Prepare journal entries for the following transactions in U.S. Dollars. Also prepare any necessary adjusting entries at December 31 caused by fluctuations in the value of the lira. Assume that the company uses a perpetual inventory system.
Transactions in 2011
1-Feb Bought Equipment for 40,000 lira on credit
1-Apr Paid for the equipment purchased February 1
1-Jun Bought inventory for 30,000 lira on credit
1-Aug Sold 70 percent of invetory purchased June 1 for 40,000 lira on credit
1-Oct Collected 30,000 lira from the sales made on August 1, 2011
1-Nov Paid 20,000 lira on the debts incurred on June 1, 2011
Transactions in 2012
1-Feb Collected remaining 10,000 lira from August 1, 2011 sales
1-Mar Paid remaining 10,000 lira in the debts incurred June 1, 2011
Currency exchange rates for 1 lira for 2011
1-Feb $0.44
1-Apr 0.45
1-Jun 0.47
1-Aug 0.48
1-Oct 0.49
1-Nov 0.50
31-Dec 0.52
Currency Exchange rates for 1 lira 2012
1-Feb $0.54
1-Mar 0.55