Foreign Currency Transactions
In each of the following examples, determine the gain or loss resulting from foreign exchange transactions. All exchange rates are shown as the number outs. Dollars required to obtain one unit of foreign currency.
a. Bancroft Company purchases supplies and records an account payable of100,000 Japanese yen. The exchange rate on the purchase date is $0.007. When the account payable is paid, the exchange rate has risen to $0.008.
b. Vaughn Enterprises sells services and records an account receivable of12,000 British pounds when the exchange rate is $1.55.Vaughan receives payment in pounds from the British buyer when the exchange rate is $1.60.
c. Bishop Chess Company records an account payable of 60,000 Swiss francs when the exchange rate is $0.65. At payment date, the exchange rate has fallen to $0.62.
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