Datamix, a U.S. corporation with customers in several foreign countries, had the following selected transactions for 2019

Question:

Datamix, a U.S. corporation with customers in several foreign countries, had the following selected transactions for 2019 and 2020.

2019

May 26 Sold merchandise for 6.5 million yen to Fuji Company of Japan, payment in full to be received in 60 days. On this day, the exchange rate for yen is $0.0093.

June 1 Sold merchandise to Fordham Ltd. of Great Britain for $64,800 cash. The exchange rate for pounds is $1.4498 on this day.

July 25 Received Fuji?s payment in yen for its May 26 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $0.0092 on this day.

Oct. 15 Sold merchandise on credit to Martinez Brothers of Mexico. The price of 378,000 pesos is to be paid 90 days from the date of sale. On this day, the exchange rate for pesos is $0.1020.

Dec. 6 Sold merchandise for 250,000 yuans to Chi-Ying Company of China, payment in full to be received in 30 days. The exchange rate for yuans is $0.1439 on this day.

Dec. 31 Recorded adjusting entries to recognize exchange gains or losses on Datamix?s annual financial statements. Rates for exchanging foreign currencies on this day follow.

2020

Jan. 5 Received Chi-Ying?s full payment in yuans for the December 6 sale and immediately exchanged the yuans for dollars. The exchange rate for yuans is $0.1580 on this day.

Jan. 13 Received full payment in pesos from Martinez for the October 15 sale and immediately exchanged the pesos for dollars. The exchange rate for pesos is $0.1039 on this day.

Required

1. Prepare journal entries for the Datamix transactions and adjusting entries.

2. Compute the foreign exchange gain or loss to be reported on Datamix?s 2019 income statement.

3. What actions might Datamix consider to reduce its risk of foreign exchange gains or losses?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...

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