On November 30, 20X5, Bow Company received goods with a cost denominated in pounds. During December 20X5,

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On November 30, 20X5, Bow Company received goods with a cost denominated in pounds. During December 20X5, the dollar's value declined relative to the pound. Bow believes that the original exchange rate will be restored by the time payment is due in 20X6.

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a. State how Bow should report the impact, if any, on its \(20 \times 5\) financial statements of the changes in the exchange rate of the dollar and the pound.

b. Explain why the reporting is appropriate.

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