Problem
Alex Company had the following foreign currency transactions:
On November 1, 2016, Alex purchased machine parts from a company located in Berlin, Germany. Merchant is to pay €125,000 on February 1, 2017.
The direct exchange rates are as follows:
November 1, 2016 ....... €1 = $0.60
December 31, 2016....... €1 = $0.62
February 1, 2017......... €1 = $0.58
Required
a. Prepare T-accounts and entries for the following account related to these transactions: Accounts Payable (€).
b. Within the T-accounts and entries you have prepared, appropriately record the following items:
1. The November 1, 2016, import transaction (purchase).
2. The December 31, 2016, year-end adjustment required of the foreign currency- denominated payable of €125,000.
3. The February 1, 2017, adjusting entry to determine the U.S. dollar-equivalent value of the foreign currency payable on that date.
4. The February 1, 2017, settlement of the foreign currency payable.