On December 1, Year1, El Primero Company purchases inventory from a foreign supplier for 40,000 coronas. Payment will be made in 90 days after El Primero has sold this merchandise. Sales are made rather quickly and El Primero pays this entire obligation on February 15, Year 2. The following exchange rates for 1 corona apply.

Date U.S. Dollar per corna

December 1, Year 1 $0.87
December 31, Year 1 0.82
February 15, Year 2 0.91

Prepare all journal entries for El Primero in connection with the purchase and payment.

To prepare the journal entries for El Primero in connection with the purchase and payment, we need to consider the exchange rates on the relevant dates and calculate the amounts in U.S. dollars.

1. On December 1, Year 1:
El Primero purchased inventory from a foreign supplier for 40,000 coronas.
Exchange rate: $0.87 per corona.

Journal entry:
Inventory (debit) $34,800 [(40,000 coronas * $0.87 per corona)]
Accounts Payable (credit) $34,800

2. On December 31, Year 1:
There are no journal entries required on this date as it is not related to the payment.

3. On February 15, Year 2:
El Primero pays the entire obligation to the foreign supplier.
Exchange rate: $0.91 per corona.

To calculate the amount in U.S. dollars, we need to convert the 40,000 coronas using the exchange rate.

Journal entry:
Accounts Payable (debit) $36,400 [(40,000 coronas * $0.91 per corona)]
Cash (credit) $36,400

These journal entries reflect the purchase of inventory on December 1, Year 1, and the subsequent payment on February 15, Year 2, after converting the amounts into U.S. dollars using the given exchange rates.