On May 8, 2013, Jett Company (a U.S. company) made a credit sale to Lopez (a Mexican company). The terms of the sale required Lopez to pay 610,000 pesos on February 10, 2014. 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, 2013 $ 0.1873 June 30, 2013 0.1882 September 30, 2013 0.1893 December 31, 2013 0.1876 February 10, 2014 0.1915 Compute the foreign exchange gain or loss that Jett should report on each of its quarterly income statements for the last three quarters of 2013 and the first quarter of 2014.

On May 8, 2013, Jett Company (a U.S. company) made a credit sale to Lopez (a Mexican company). The terms of the sale required Lopez to pay 610,000 pesos on February 10, 2014. 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, 2013	$	0.1873
June 30, 2013		0.1882
September 30, 2013		0.1893
December 31, 2013		0.1876
February 10, 2014		0.1915

  

Compute the foreign exchange gain or loss that Jett should report on each of its quarterly income statements for the last three quarters of 2013 and the first quarter of 2014.

Compute the amount to be reported on Jett's balance sheets at the end of each of its last three quarters of 2013.

Explanation:

Quarter ended June 30, 2013
May 8 recorded amount (610,000 × $0.1873)	$	114,253
June 30 balance sheet amount (610,000 × $0.1882)		114,802
Foreign exchange gain	$	549

 

Quarter ended September 30, 2013
June 30 balance sheet amount	$	114,802
Sept. 30 balance sheet amount (610,000 × $0.1893)		115,473
Foreign exchange gain	$	671

  

Quarter ended December 31, 2013
Sept. 30 balance sheet amount	$	115,473
Dec. 31 balance sheet amount (610,000 × $0.1876)		114,436
Foreign exchange loss	$	1,037

  

Quarter ended March 31, 2014
Dec. 31 balance sheet amount	$	114,436
Feb. 10, 2014, amount received (610,000 × $0.1915)		116,815
Foreign exchange gain	$	2,379

  

Note — The combined net gain for all four quarters equals:

$2,562  ($549 + $671 − $1,037 + $2,379).

This amount also equals the difference between the number of dollars finally received ($116,815) and the initial measure of the account receivable ($114,253).  In addition, this amount equals the number of pesos (610,000) owed by the customer times the change in the exchange rate ($0.0042) between the beginning rate ($0.1873) and the ending rate ($0.1915).