Paramount Sales Corporation, a U.S. company that has customers in several foreign countries, had the following transactions
Question:
Paramount Sales Corporation, a U.S. company that has customers in several foreign countries, had the following transactions in 1990 and 1991.
1990 June 6 Sold merchandise for 125,000 francs to Poirot Company of Brussels, payment in full to be received in 60 days. On this day, the foreign exchange rate for francs into dollars was \(\$ 0.02822\).
July 17 Sold merchandise to Nordhoff Distributors of West Germany for \(\$ 8,880\) cash. The exchange rate for marks into dollars was \(\$ 0.5920\).
Aug. 1 Received Poirot Company's payment for its purchase of June 6, and exchanged the francs for dollars. The current foreign exchange rate for francs into dollars was \(\$ 0.02840\).
Oct. 25 Sold merchandise on credit to British Imports, Ltd., a company located in London, England. The price of 3,000 pounds was to be paid 90 days from the date of sale. The exchange rate for pounds into dollars was \(\$ 1.7730\) on October 25.
Nov. 30 Sold merchandise for 350,000 yen to Yamoto Company of Japan, payment in full to be in 60 days. The exchange rate for yen into dollars was \(\$ 0.007710\).
Dec. 31 Prepared adjusting entries to recognize exchange gains or losses on the annual financial statements. Rates for exchanging foreign currencies into dollars on this day included the following:
1991 Jan. 23 Received British Imports, Ltd.'s full payment for the sale of October 25 and immediately exchanged the pounds for dollars. The exchange rate for pounds into dollars was \(\$ 1.7628\).
29 Received full payment for Yamoto Company for the sale of November 30 and immediately exchanged the yen for dollars. The exchange rate for yen into dollars was \(\$ 0.007779\).
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1. Prepare general journal entries to account for these transactions of Paramount Sales Corporation.
2. Calculate the exchange gain or loss to be reported on Paramount Sales Corporation's 1990 income statement.
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