1. Chapter 9: Excel Case - Determine Foreign Exchange Gains & Losses (20 points)

Import/Export Company, a U.S. company, made a number of import purchases and export sales denominated in foreign currency in 2015. Information related to these transactions is summarized in the following table. The company made each purchase or sale on the date in the Transaction Date column and made payment in foreign currency or received payment on the date in the Settlement Date column.

Foreign Currency

Type of Transaction

Amount in

Foreign Currency

Transaction

Date

Settlement

Date

Brazilian real (BRL)

Import purchase

(130,000)

1/10/2015

5/10/2015

Chilean peso (CLP)

Import purchase

(30,000,000)

1/10/2015

5/10/2015

Swiss franc (CHF)

Export sale

50,000

1/10/2015

4/10/2015

Swiss franc (CHF)

Import purchase

(50,000)

4/10/2015

7/10/2015

Euro

Export sale

45,000

1/10/2015

4/10/2015

Euro

Export sale

45,000

4/10/2015

7/10/2015

Chinese yuan (CNY)

Import purchase

(300,000)

1/10/2015

7/10/2015

Required

1.Create an electronic spreadsheet with the information from the preceding table. Label columns as follows:

oForeign Currency

oType of Transaction

oAmount in Foreign Currency

oTransaction Date

oExchange Rate at Transaction Date

o$ Value at Transaction Date

oSettlement Date

oExchange Rate at Settlement Date

o$ Value at Settlement Date

oForeign Exchange Gain (Loss)

2.Use historical exchange rate information available on the Internet atwww.x-rates.com, Historic Lookup, to find the 2015 exchange rates between the U.S. dollar and each foreign currency on the relevant transaction and settlement dates.

3.Complete the electronic spreadsheet to determine the foreign exchange gain (loss) on each transaction. Determine the total net foreign exchange gain (loss) reported in Import/Export Company's 2015 income statement.

4.Explain why a foreign exchange gain arises for some transactions and a foreign exchange loss occurs for other transactions.