Question 1 (34 marks)

A- On October 1, 2020, Penton Corporation, a UK company sold a truck to XYZ Corporation, a US company, for $10,000 and XYZ agreed to pay in pounds on March 1, 2021. The spot rates for the British pound on October 1, 2020, December 31, 2020, and March 1, 2021, are $1.60, $1.64, and $1.58, respectively.

Required:

1. Record these transactions in the accounting records of XYZ Corporation and Penton Corporation.

- Did the U.S. dollar strengthen or weaken from October to March and what are the implications for XYZ business? Prove your answer.

3- How much foreign exchange gain/loss each company made? Why?