Chocolate De-lites imports and exports chocolate delicacies. Some transactions are denominated in U. S. dollars and others in foreign currencies. A summary of accounts receivable and accounts payable on December 31, 20X6, before adjustments for the effects of changes in exchange rates during 20X6, follows: Accounts receivable:
In U. S. dollars $ 164,000
In 475,000 Egyptian pounds (E£) $ 73,600
Accounts payable:
In U. S. dollars $ 86,000
In 21,000,000 yen (¥) $ 175,300
The spot rates on December 31, 20X6, were
E£1 = $0.176
¥1 = $0.0081
The average exchange rates during the collection and payment period in 20X7 are
E£1 = $0.18
¥1 = $0.0078
Required:
a. Prepare the adjusting entries on December 31, 20X6.
1. Record the entry to adjust the receivable denominated in Egyptian pounds to the U. S. dollar equivalent.
2, Record the entry to adjust the payable denominated in Japanese yen to the U. S. dollar equivalent.
b. Prepare the collection of the accounts receivable in 20X7.
1. Record the entry to adjust the receivable denominated in Egyptian pounds to the equivalent U. S. dollar value on the settlement date.
2. Record the collection of all accounts receivable.
c. Prepare the payment of the accounts payable in 20X7.
1. Record the entry to adjust the payable to the equivalent U. S. dollar value on the settlement date.
2. Record the purchase of Japanese yen at the $0.0078 spot rate to settle the account.
3. Record the payment of all accounts payable.