Question

Globalization is a continuous process whereby managers become aware of the impact of international activities on their companies. This process takes place in stages that include exporting, licensing joint ventures, wholly owned subsidiaries, and global sourcing. Each stage has implications for the type of accounting information reported.

Striking Furs imports furs from Canada. In the space provided below, prepare journal entries to record the following events.

Dec. 11, 2017: Purchased furs from Capable Trappers, Ltd., a Canadian corporation, at a price of 25,000 Canadian dollars, due in 60 days. The current exchange rate is $0.85 U.S. dollars per Canadian dollar. (Striking uses the perpetual inventory method; debit the Inventory account.)

Dec. 31, 2017: Striking made a year-end adjusting entry relating to the account payable to Capable Trappers. The exchange rate at year-end is $0.89 U.S. dollars per Canadian dollar.

Feb. 9, 2018: Issued a check for $21,750 (U.S. dollars) to National Bank in full settlement of the liability to Capable Trappers, Ltd. The exchange rate at this date is $0.87 U.S. dollars per Canadian dollar.

Answer 1

Date	Account Heading	Debit	Credit
11-Dec	Inventory	$21,250
	Accounts Payable ($0.85*25000 Canadian Dollar)		$21,250
31-Dec	Transaction Loss	$1,000
	Accounts Payable		$1,000
	Accounts payable valued at 12/31 (25,000 Canadian dollar x $0.89/Canadian Dollar)		$22,250
	Accounts payable valued at 12/11 (25,000 Canadian dollar x $0.85/Canadian Dollar)		21,250
	Adjustment to accounts payable needed		$1,000
9-Feb	Accounts Payable	$22,250
	Transaction Gain		$500
	Cash (25000 Canadian Dollar* $ 0.87/ Canadian Dollar)		21750