Response to the following :
Computation of Foreign Exchange Gains and Losses
Refer to problem. Compute the foreign exchange gain or loss that should be reported in (1) Year 1 and (2) Year 2.
Problem :
Journal Entry to Record a Foreign Currency Transaction
On November 6 of Year 1, the company provided services (on account) to a client located in Thailand. The contract price is 100,000 Thai baht. On November 6, the exchange rate was 50 baht for one U.S. dollar. On December 31, the exchange rate was 40 baht for one U.S. dollar. The company received payment on the account on March 23 of Year 2. On that date, the exchange rate was 100 baht for one U.S. dollar. Make the journal entry necessary on November 6 to record the performance of the service.