Assume that Big Buy Stores completed the following foreign- currency transactions:
May 9 Purchased DVD players as inventory on account from Toyita, a Japanese company. The price was 350,000 yen, and the exchange rate of the yen was $ 0.0078.
Jun 18 Paid Toyita when the exchange rate was $ 0.0073.
22 Sold merchandise on account to Bon Appetit, a French company, at a price of 25,000 euros. The exchange rate was $ 1.17. Ignore cost of goods sold.
28 Collected from Bon Appetit when the exchange rate was $ 1.15.
1. Journalize these transactions for Big Buy. Focus on the gains and losses caused by changes in foreign-currency rates; round your answers to the nearest whole dollar.
2. On May 10, immediately after the purchase, and on June 23, immediately after the sale, which currencies did Big Buy want to strengthen? Which currencies did in fact strengthen? Explain your reasoning.