Question

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 2015
February 1	Bought equipment for 40,000 lira on credit.
April 1	Paid for the equipment purchased February 1.
June 1	Bought inventory for 30,000 lira on credit.
August 1	Sold 70 percent of inventory purchased June 1 for 40,000 lira on credit.
October 1	Collected 30,000 lira from the sales made on August 1, 2015.
November 1	Paid 20,000 lira on the debts incurred on June 1, 2015.
Transactions in 2016
February 1	Collected remaining 10,000 lira from August 1, 2015, sales.
March 1	Paid remaining 10,000 lira on the debts incurred on June 1, 2015.
Currency exchange rates for 1 lira for 2015
February 1	$0.44
April 1	0.45
June 1	0.47
August 1	0.48
October 1	0.49
November 1	0.50
December 31	0.52
Currency exchange rates for 1 lira for 2016
February 1	$0.54
March 1	0.55

Answer 1

Date	Account Description	Debit	Credit
1-Feb	Equipment	17,600.00
	Accounts Payable		17,600.00
	(Being Equipmengt Purchased)
1-Apr	Accounts Payable	17,600.00
	Forex Loss	400.00
	Cash		18,000.00
	(Being payment made for Equipment Purchase)
1-Jun	Purchases (Inventory)	14,100.00
	Accounts Payable		14,100.00
1-Aug	Accounts Receivable	19,200.00
	Sales Revenue		19,200.00
1-Aug	Cost of Goods Sold	9,870.00
	Purchases		9,870.00
1-Oct	Cash	9,800.00
	Accounts Receivable		9,600.00
	Forex Gain		200.00
1-Nov	Accounts Payable	9,400.00
	Forex Loss	600.00
	Cash		10,000.00
31-Dec	Accounts Receivable	500.00
	Forex Loss	300.00
	Accounts Payable		800.00
	(Being Amount Restated at the Closing rate)

2016
Date	Account Description	Debit	Credit
1-Feb	Cash	5,400.00
	Accounts Receivable		5,200.00
	Forex gain		200.00
1-Mar	Accounts Payable	10,400.00
	Forex Loss	600.00
	Cash		11,000.00

Balance as on 31st Dec	Amount in Lira	Amount in USD	Closing Rate	Closing Balance	Forex
Accounts Payable	20,000.00	9,600.00	0.52	10,400.00	800.00
Accounts Receivable	10,000.00	4,700.00	0.52	5,200.00	500.00

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