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?
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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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For Part B:
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1Record the sale of the equipment with the receivable denominated in Spanish pesetas.
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2Record the revaluation of the foreign currency receivable to the current U.S. dollar equivalent.
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3Record the revaluation of the foreign receivable to the current U.S. dollar equivalent.
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4Record the collection of the foreign receivable.
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