(Learning Objective 5: Recording foreign currency transactions and reporting the transaction gain or loss) Suppose Bridgestone Corporation completed the following international transactions:
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May 1 |
Sold inventory on account to Fiat, the Italian automaker, for E82,000. The exchange rate of the euro is $1.30, and Fiat demands to pay in euros. |
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10 |
Purchased supplies on account from a Canadian company at a price of Canadian $50,000. The exchange rate of the Canadian dollar is $0.70, and payment will be in Canadian dollars. |
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17 |
Sold inventory on account to an English firm for 100,000 British pounds. Payment will be in pounds, and the exchange rate of the pound is $1.90. |
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22 |
Collected from Fiat. The exchange rate is E1 = $1.33. |
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June 18 |
Paid the Canadian company. The exchange rate of the Canadian dollar is $0.69. |
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24 |
Collected from the English firm. The exchange rate of the British pound is $1.87. |
Required
1. Record these transactions in Bridgestone’s journal and show how to report the transaction gain or loss on the income statement.
2. How will what you learned in this problem help you structure international transactions? (Challenge)