Suppose Desmond Corporation completed the following international transactions:
May 1 Sold inventory on account to Aromando, the Italian automaker, for 65,000. The exchange rate of the euro was $ 1.33, and Aromando demands to pay in euros. Ignore cost of goods sold.
10 Purchased supplies on account from a Canadian company at a price of Canadian $ 52,000. The exchange rate of the Canadian dollar was $ 0.72, and the payment will be in Canadian dollars.
17 Sold inventory on account to an English firm for 125,000 British pounds. Payment will be in pounds, and the exchange rate of the pound was $ 1.93. Ignore cost of goods sold.
22 Collected from Aromando. The exchange rate is 1 $ 1.36.
Jun 18 Paid the Canadian company. The exchange rate of the Canadian dollar is $ 0.71.
24 Collected from the English firm. The exchange rate of the British pound was $ 1.90.
1. Record these transactions in Desmond’s journal, and show how to report the foreign currency transaction gain or loss on the income statement.
2. How will what you learned in this problem help you structure international transactions?