Reference no: EM132878576
Question - On November 20, 20X5, Diamond Corporation, a calendar-year US corporation, had merchandise delivered from a vendor in France. The invoice was for 350,000 euro and was due January 20, 20X6. On December 13, 20X5, Diamond's British division sold the merchandise and issued the customer an invoice for 400,000 pounds due February 13, 20X6. Both invoices were paid on their due date. Exchange rates were as follows:
|
Date
|
Euro
|
British Pound
|
|
November 20, 20X5
|
$1.1698 E
|
$1.6356 BP
|
|
December 13, 20X5
|
1.1713 E
|
1.6317 BP
|
|
December 31, 20X5
|
1.1684 E
|
1.6286 BP
|
|
January 20, 20X6
|
1.1665 E
|
1.6334 BP
|
|
February 13, 20X6
|
1.1652 E
|
1.6293 BP
|
Required -
A. Record all journal entries related to the purchase and sales transactions in Diamond Corporation's books on the following dates. Be sure to identify floating amounts with the proper foreign currency (i.e., €/euro or £/pound) for full credit. Hint - there are 6 journal entries. The journal entry dates are as follows: November 20, 20X5, December 13, 20X5, December 31, 20X5, January 20, 20X6, and February 13, 20X6.
B. Determine the net exchange gain/(loss) from the above purchase and sale transactions to be included in Diamond's Income Statement for 20X5 and 20X6. Identify whether it is a gain or loss.