Marko Company sold spray paint equipment to Spain for 4,000,000 pesetas (P) on October 1, with payment due in six months. The exchange rates were October 1, 20X6 December 31, 20X6 April 1, 20X7 Required: 1 peseta = $0.0048 1 peseta = 0.0075 1 peseta = 0.0073 a. Did the dollar strengthen or weaken relative to the peseta during the period from October 1 to December 31? Did it strengthen or weaken between January 1 and April 1 of the next year? b. Prepare all required journal entries for Marko as a result of the sale and settlement of the foreign transaction, assuming that its fiscal year ends on December 31. c. How much overall net gain or net loss did Marko have from its foreign currency exposure?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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For Part B:

  • 1
    Record the sale of the equipment with the receivable denominated in Spanish pesetas.
     
  • 2
    Record the revaluation of the foreign currency receivable to the current U.S. dollar equivalent.
     
  • 3
    Record the revaluation of the foreign receivable to the current U.S. dollar equivalent.
     
  • 4
    Record the collection of the foreign receivable.
Marko Company sold spray paint equipment to Spain for 4,000,000 pesetas (P) on October 1, with payment due in six
months. The exchange rates were
October 1, 20X6
December 31, 20X6
April 1, 20X7
Required:
1 peseta = $0.0048
1 peseta = 0.0075
1 peseta = 0.0073
a. Did the dollar strengthen or weaken relative to the peseta during the period from October 1 to December 31? Did it
strengthen or weaken between January 1 and April 1 of the next year?
b. Prepare all required journal entries for Marko as a result of the sale and settlement of the foreign transaction, assuming
that its fiscal year ends on December 31.
c. How much overall net gain or net loss did Marko have from its foreign currency exposure?
Transcribed Image Text:Marko Company sold spray paint equipment to Spain for 4,000,000 pesetas (P) on October 1, with payment due in six months. The exchange rates were October 1, 20X6 December 31, 20X6 April 1, 20X7 Required: 1 peseta = $0.0048 1 peseta = 0.0075 1 peseta = 0.0073 a. Did the dollar strengthen or weaken relative to the peseta during the period from October 1 to December 31? Did it strengthen or weaken between January 1 and April 1 of the next year? b. Prepare all required journal entries for Marko as a result of the sale and settlement of the foreign transaction, assuming that its fiscal year ends on December 31. c. How much overall net gain or net loss did Marko have from its foreign currency exposure?
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