Question

On May 8, 2017, Jett Company (a U.S. company) made a credit sale to Lopez (a Mexican company). The terms of the sale required Lopez to pay 1,470,000 pesos on February 10, 2018. Jett prepares quarterly financial statements on March 31, June 30, September 30, and December 31. The exchange rates for pesos during the time the receivable is outstanding follow.

May 8, 2017	$	0.1894
June 30, 2017		0.1903
September 30, 2017		0.1914
December 31, 2017		0.1897
February 10, 2018		0.1936

Compute the foreign exchange gain or loss that Jett should report on each of its quarterly income statements for the last three quarters of 2017 and the first quarter of 2018.

Compute the amount reported on Jett's balance sheets at the end of each of its last three quarters of 2017.

Answer 1

Foreign Exchange Gain / (Loss) to be reported by Jett at the end of:

• Quarter 2 (June 30, 2017): 1,470,000 * $(0.1903 - 0.1894) = $1,323
• Quarter 3 (September 30, 2017): 1,470,000 * $(0.1914 - 0.1903) = $1,617
• Quarter 4 (December 31, 2017): 1,470,000 * $(0.1897 - 0.1914) = ($2,499)
• Quarter 1 (March 31, 2018): 1,470,000 * $(0.1936 - $0.1914) = $3,234

Amount to be reported by Jett at the end of:

• Quarter 2 (June 30, 2017): 1,470,000 * $0.1903 = $279,741
• Quarter 3 (September 30, 2017): 1,470,000 * $0.1914 = $281,358
• Quarter 4 (December 31, 2017): 1,470,000 * $0.1897 = $278,859