David provided details around the company's largest had considered using a forward contract exchange rates $($Exhibit III$).$ but ultimately chose not to

After a bit of research, you determined that the following rates were applicable to af contract to sell $$1,250,000$ U$.$S$.$ settling on December $15,2023$ :

$\backslash$table$[[$Date$,$Forward contract rate$],[$April $1,1\mathrm{.}295],[$November $1,1\mathrm{.}28]]$

Prepare a memo for the Beckhams that discusses ways the company could manage the risk associated with foreign currency denominated transactions in the future.

Include with your memo a comparison of the effect on ESE's net income of the U$.$S$.$ sale transaction as it was recorded to the effect had the company entered into a forward contract on April $1$ to sell $$1,250,000$ USD on December $15.$ Include in your discussion, a brief comparison of the income effect of designating or not designating the forward contract as a hedge of the saie

Exhibit III

Foreign Transaction

Prepared by David Beckham

In $2023,$ SSM had a large order from a U$.$S$.$ client which resulted in a foreign exchange loss. We had considered entering into a forward currency contract but we were not confident that we knew what we were doing and so opted not to use one. We are wondering if that was a mistake on our part. We anticipate that our U$.$S$.$ sales will increase considerably over the next few years. Our goal is to have consistent sales in the U$.$S$.$ by $2026$ but for now we expect to continue to have sporadic sales over the next few years as we build our reputation in the United States. I am concerned with the loss we experienced on the foreign exchange and hope you can provide us with some advice on how we can manage the risk both now and when the U$.$S$.$ sales become more consistent.

SSM does not have a U$.$S$.$ denominated bank account so all foreign source cash is converted to Canadian dollars immediately. Here is some information related to the sale that occurred in

$\backslash$table$[[,$Date,USD $$,\backslash$table$[[$Exchange$],[$rate$]],$CDN $$],[$Sales order received,April $1,$$$1,500,000,1\mathrm{.}34,$$$2,010,000,,,],[$Deposit received,April $1,$$$250,000,1\mathrm{.}34,335,000,,,],[$Product delivered,November $1,$$$1,500,000,1\mathrm{.}30,1,950,000,,,],[$Balance of payment received,December $15,$$$1,250,000,1,27,1,587,500,,,]]$ Only do the journal entries needed for a forward contract and if a forward not used