Mardi Gras Corporation operates a group of specialty shops throughout the southeastern United States. The shops have
Question:
Mardi Gras records the purchases in inventory when it receives the merchandise and records a liability to the Swiss company, using the exchange rate for Swiss francs on the date the inventory purchase is recorded. When payment is made, Mardi Gras debits or credits to inventory any difference between the liability previously recorded and the dollar amount required to settle the liability in Swiss francs. Mardi Gras uses a perpetual inventory system and the FIFO method of inventory costing and can easily trace these adjustments to the specific inventory purchased.
Required
Obtain the most current accounting standards on accounting for foreign currency transactions. You can obtain access to accounting standards through the FASB codification. As a staff accountant with the public accounting firm that audits Mardi Gras's annual financial statements, write a memo to Marie Lamont, the manager in charge of the audit, discussing the client's accounting for its transactions with the Swiss company. Support any recommendations with citations and quotations from the authoritative financial reporting standards.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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Related Book For
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
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