Receivables in Foreign Currency Montana Corporation sold inventory costing $150,000 to a company in Atlantis for 900,000 atlans, the official currency of Atlantis. At the time the inventory was ordered, the exchange rate was 3.0 atlans for $1. At the time the inventory was shipped, the exchange rate was 2.5 atlans for $1. At the time payment was received, the rate had increased to 3.5 atlans to $1. Sales are made f.o.b. shipping point.

a. At what amount should Montana Corporation record the sale? What profit should Montana report on the sale?

b. In what way, if any, should Montana account for the change in exchange rates between the date the order is received and the shipment of the inventory?

c. In what way, if any, should Montana account for the change in exchange rates between the date of shipment and the receipt of payment?

d. Montana did not take any action to reduce the risk of currency fluctuations related to this transaction. Was that a wise decision? What actions might Montana have taken to reduce or eliminate the effects of currency fluctuations?