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Compute the foreign exchange gain or loss

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Reference no: EM131535012

Question: Datamix, a U.S. corporation with customers in several foreign countries, had the following selected transactions for 2011 and 2012. 2011 May 26 Sold merchandise for 6.5 million yen to Fuji Company of Japan, payment in full to be received in 60 days. On this day, the exchange rate for yen is $0.0094. June 1 Sold merchandise to Fordham Ltd. of Great Britain for $72,613 cash. The exchange rate for pounds is $1.5277 on this day. July 25 Received Fuji's payment in yen for its May 26 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $0.0090 on this day. Oct. 15 Sold merchandise on credit to Martinez Brothers of Mexico. The price of 373,000 pesos is to be paid 90 days from the date of sale. On this day, the exchange rate for pesos is $0.1340. Dec. 6 Sold merchandise for 242,000 yuans to Chi-Ying Company of China, payment in full to be received in 30 days. The exchange rate for yuans is $0.1975 on this day. Dec. 31 Recorded adjusting entries to recognize exchange gains or losses on Datamix's annual financial statements. Rates of exchanging foreign currencies on this day follow.

Yen (Japan) . . . . . . . . . . . . $0.0094

Pounds (Britain) . . . . . . . . 1.5318

Pesos (Mexico) . . . . . . . . . 0.1560

Yuans (China) . . . . . . . . . . 0.2000

2012 Jan. 5 Received Chi-Ying's full payment in yuans for the December 6 sale and immediately exchanged the yuans for dollars. The exchange rate for yuans is $0.2060 on this day. Jan. 13 Received full payment in pesos from Martinez for the October 15 sale and immediately exchanged the pesos for dollars. The exchange rate for pesos is $0.1420 on this day.

Required: 1. Prepare journal entries for the Datamix transactions and adjusting entries.

2. Compute the foreign exchange gain or loss to be reported on Datamix's 2011 income statement.
Analysis Component

3. What actions might Datamix consider to reduce its risk of foreign exchange gains or losses?

Reference no: EM131535012

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