(Learning Objective 5: Recording foreign currency transactions and reporting the transaction gain or loss) Sun Power Drinks, Inc.(SPD) completed the following international transactions:
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Apr. 4 |
Sold soft drink syrup on account to a Mexican company for $81,000. The exchange rate of the Mexican peso is $0.101, and the customer agrees to pay in dollars. |
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13 |
Purchased inventory on account from a Canadian company at a price of Canadian $100,000. The exchange rate of the Canadian dollar is $0.65, and payment will be in Canadian dollars. |
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20 |
Sold goods on account to an English firm for 70,000 British pounds. Payment will be in pounds, and the exchange rate of the pound is $1.96. |
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27 |
Collected from the Mexican company. |
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May 21 |
Paid the Canadian company. The exchange rate of the Canadian dollar is $0.62. |
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June 17 |
Collected from the English firm. The exchange rate of the British pound is $2.00. |
Required
1. Record these transactions in Sun’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)