Assume that circuit city stores completed the following foreign-currency transactions:
Mar. 17: Purchased DVD players as inventory on account from Sony. The price was 300,000 yen, and the exchange rate of the yen was $0.0086
Apr. 16: Paid sony when the exchange rate was $0.0082
Apr. 19: Sold merchandise on account to BonTemps, a french company, at a price of 60,000 euros. The exchange rate was $1.20
Apr. 30: Collected from BonTemps when the exchange rate was $1.15.
1. Journalize these transactions for Circuit City. Focus on the gains and losses caused by changes in foreign-currency rates.
2. On March 18, immediately after the purchase, and on April 20, immediately after the sale, which currencies did Circuit City want to strengthen? Which currencies did in fact strengthen? Explain your reasoning.