Grammy Ltd a Canadian company is dealing with a supplier
Grammy Ltd., a Canadian company, is dealing with a supplier in a foreign country. On May 1, Year 4, the company made purchases totalling FF3,270,000; this amount is payable in six months. Grammy did not hedge the transaction in any way.
On the due date, Grammy found itself in financial difficulty. The supplier agreed to accept a non-interest-bearing note payable for FF3,000,000 and FF270,000 in cash. The note payable is due July 1, Year 6. Grammy did not hedge the note.
Grammy has a December 31 fiscal year-end.
May 1, Year 4 $1 = FF2
November 1, Year 4 $1 = FF2.6
December 31, Year 4 $1 = FF3.8
Required:
Prepare the journal entries for Year 4 for the accounts payable and the note payable.
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