Suppose Custom Ice Cream Corporation completed the following transactions:

2020

Dec. 4 Sold product on account to a Mexican company for $110,000. The exchange rate of the Mexican peso was $0.078, and the customer agreed to pay in Canadian dollars.

13 Purchased inventory on account from an American company at a price of US$240,000. The exchange rate of the US dollar was $1.05, and payment will be in US dollars. Assume that Custom uses a perpetual inventory system.

20 Sold goods on account to an English retailer for £180,000. Payment will be in pounds, and the exchange rate of the pound was $1.66. Ignore the cost of goods sold and inventory entry.

27 Collected from the Mexican company. The exchange rate of the Mexican peso was $0.075.

31 Adjusted the accounts for changes in foreign-currency exchange rates in one compound entry. Year-end rates: US dollar, $1.07; British pound, $1.65.

2021

Jan. 21 Paid the American company. The exchange rate of the US dollar was $1.06.

Feb. 17 Collected from the English firm. The exchange rate of the British pound was $1.69.

Required

1. Record these transactions in Custom Ice Cream Corporation’s general journal, and show how to report the transaction gain or loss on the income statement for the year ended December 31, 2020. No explanations are required.

2. How will what you have learned in this problem help you structure international transactions?